What’s an L3C?

Social Enterprise with the L3C

A new model for furthering charitable and educational purposes while earning a profit is the L3C, or low-profit limited liability company. A variant of the Limited Liability Company (LLC), an L3C is run like a business and is profitable, but its primary aim is to provide a social benefit – through a double or triple bottom line.  An L3C can attract various types of investors, as well as accept foundation funds in the form of program-related investments (PRIs), mission-related investments, loans and guarantees.

Legislation authorizing the L3C model has only been passed in eight states, including Michigan, and two Native American tribes. The Philanthropic Facilitation Act of 2011 was proposed in the House of Representatives by Representative Aaron Schock and co-sponsored by Representative Jared Polis to amend federal law.  This bi-partisan legislation would facilitate the process through which foundations can make philanthropic investments in PRIs to L3Cs, or “for-profit entities with a nonprofit soul.”  Both the Council on Foundations and the Council of Michigan Foundations support this legislation as an opportunity for innovative entrepreneurs to advance social change and improve economic growth throughout the country.

Please read these articles to learn more about L3Cs.

“A Quest for Hybrid Companies That Can Profit, but Tap Charity” in the New York Times

“The Rise of the For-Profit Charitable Entity” in Forbes

“New Legal Structures for ‘Social Entrepreneurs'”  in the Wall Street Journal


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9 06 2016
Social Responsibility or Marketing Ploy? The Branding of L3Cs | Non Profit News For Nonprofit Organizations | Nonprofit Quarterly

[…] “What’s an L3C?,” accessed February 17, 2014, cmsjconsulting.com/whats-an-l3c/. […]

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