Companies with a Nonprofit Soul: L3Cs and B Corps

What happens when a business develops a non-profit mindset, and wants to use income for social good? Or a nonprofit develops an idea for a profitable business model?

There are a growing number of legal and taxation structures for businesses large and small who want to do good in the world, yet remain a for-profit enterprise.

This post is a companion piece to the panel discussion "L3C: Companies with a Nonprofit Soul" at the 2014 Association of Fundraising Professionals Breakfast.

Panelists speaking: Rob Stenson, Priscilla Mendenhall, and Sy Rotter. Moderator: Lisa Bunker. Organized by Heather Hiscox.

Social Enterprise Structures

501c3: The 501c3 designation allows for federal tax exemption of nonprofit organizations, specifically those that are considered public charities, private foundations or private operating foundations. They must be organized and operated exclusively for religious, charitable, scientific, testing for public safety, literary, or educational purposes, or to foster national or international amateur sports competition, or for the prevention of cruelty to children or animals. (Source: 501c3.org)

L3C: A low-profit limited liability company, also known as an L3C, is a new kind of limited liability company (LLC) that combines the financial advantages of the traditional LLC form of business with the social benefits of a non-profit entity. In addition, as a variety of LLC, the L3C generally shields its owners from the debts of the enterprise. (Source: Marc J. Lane) Essentially, it is an LLC where the social mission is its primary purpose.

B "Benefit" Corps: B Corps are corporations certified by the nonprofit B Lab to meet rigorous standards of social and environmental performance, accountability, and transparency. (Source: BCorporation.net)

L3C Resources

• A primer by Marc J. Lane: The Low-profit Limited Liability Company (L3C) .
• Comparison matrix: Effective Social Enterprise - a Menu of Legal Structures, by Robert A. Wexler, from The Exempt Organization Tax Review, June 2009.
• Book: Social Enterprise: Empowering Mission-driven Entrepreneurs (2012).
• Social Enterprise Attorney Explains the Benefit Corporation, L3C, and Flexible Purpose Corporation [Video] from Social Enterprise Buzz, December 2012.
• Corporate Creativity: The Vermont L3C & Other Developments in Social Entrepreneurship, a Symposium, February 2010.
• To L3C or Not to L3C? That was the Question, by Richard Marker, February 2013.
• L3C founders on Twitter.
• How To: Corporation Division of the State of Vermont resources.

Local Social Enterprise

• Thryve, a program of Startup Tucson, 501(c)3
  "Anncouncing Thryve – A Social Impact Incubator," Startup Tucson
• Fed By Threads, LLC
  "Fed by Threads Extends Socially-Conscious Clothing Brand to New Downtown Location," Downtown Tucsonan
• Dishes and Stories, L3C
  "Entrepreneurs in a Cultural Urban Kitchen," Zocalo Magazine
• Borderlands Restoration, L3C
• Goodmans Interior Structures, B Corp

B Corps Resources

• What are B Corps?, BCorporation.net 
• Law Allows Benefit Corporations in Arizona, AZ Central
• Goodmans Interior Structures Earns Ethics Award, AZBigMedia
• Coming to Arizona in 2015: B Corporations, Carter Law Firm

Panelist Contact information

Priscilla Mendenhall: Priscilla@dishesandstories.org, tel. 202-746-1022

Lisa Bunker: Lisa.Bunker@pima.gov
Rob Stenson: rstenson@goodmans.info
Sy Rotter: syrotter@wlousa.net

Where to Read More about L3Cs

What is an L3C?

An L3C, or "low-profit limited liability company" is a for-profit company where the investors accept limited dividends. (Source: panelist Sy Rotter)

But Really, What is It?
Effective Social Enterprise - a Menu of Legal Structures, by Robert A. Wexler, from The Exempt Organization Tax Review, June 2009.

Social Enterprise Attorney Explains the Benefit Corporation, L3C, and Flexible Purpose Corporation [Video] from Social Enterprise Buzz, December 2012.

Corporate Creativity: The Vermont L3C & Other Developments in Social Entrepreneurship, a Symposium, February 2010.

To L3C or Not to L3C? That was the Question, by Richard Marker, February 2013.

How To
Corporation Division of the State of Vermont resources

Organized Support
Americans for Community Development

Net Impact

Legislative History
History of the 2011 Bill, AZ SB 1503
This bill passed the Arizona Senate but was tabled in the House.

The L3C, Background & Legislative Issues, by Robert Lang, January 2013.

I am tremendously grateful to Sy Rotter (Washington Liaison Office LLC), Dr. Paul Melendez (UA Eller College of Management), Priscilla Mendenhall (Dishes and Stories), Michelle Lutz (Custos Fratris), Meredith Aronson, and Elizabeth Alvarez del Castillo for sharing their time and expertise on our Nov. 21, 2013 Catalyst Café panel.