AMERICANS FOR COMMUNITY DEVELOPMENT
….WHERE THE L3C WAS CREATED.
....THE L3C CAN….
HELP REBUILD INFRASTRUCTURE
BE AN ENGINE FOR ECONOMIC DEVELOPMENT
ADDRESS HOMELESS, HUNGER AND HOUSING ISSUES
IMPROVE FOOD SECURITY AND REVOLUTIONIZE THE GROWING AND PROCESSING OF FOOD
SUPPORT THE ARTS
HELP SOLVE WASTE, ENERGY AND CLIMATE ISSUES
SUPPORT MEDICAL AND SCIENTIFIC RESEARCH
Previous
Next

WHAT IS THE L3C?

SOLVING SOCIAL PROBLEMS WITH FOR PROFIT SOLUTIONS
SOLVING SOCIAL PROBLEMS WITH FOR PROFIT SOLUTIONS

It is the for profit with the nonprofit soul. It is a for profit organized to perform a social mission which must come before making a profit. A type of LLC, the L3C (Low-Profit Limited Liability Company), is able to bring together a mix of foundations, trusts, DAFs, endowments, pension plans, individuals, corporations, nonprofits, governmental entities and others in order to achieve social objectives while operating according to for-profit metrics. Just like any LLC, an L3C has the liability protection of a corporation and the flexibility of a partnership.

Check Out The Latest

  • The Latest L3C Legislation
  • Events
  • Most Recent Papers
  • About Us

Senator Ramon Luis Nieves and the Commonwealth of Puerto Rico Passes Law 233-2015 – L3Cs Now a Legal Entity

Press Release:

Americans for Community Development congratulates Senator Ramón Luis Nieves and the Commonwealth of Puerto Rico on passage of Law 233-2015 adding Puerto Rico to the legal entities within the United States authorized to organize businesses as L3Cs. We know the last year has presented Puerto Rico with some unique challenges and we hope individuals and organizations in Puerto Rico will be able to use the tools contained in this bill to relieve some of the issues and help move Puerto Rico and its residents forward.

Anyone wishing more information on the power of the L3C should consult our website https://americansforcommunitydevelopment.org/ for more information.

Contact: 914-248-2443

Check back to this space for L3C events. If you are an L3C and you wish us to post one of your events, please send the information including HTML links to Info@AmericansforCommunityDevelopment.org

Opportunity Zone Funds L3Cs, PRIs & DAFs

Bringing together Opportunity Zone funds, L3Cs, PRIs and DAFs creates the perfect storm which will insure that the deferred capital gains will be used to maximize the benefits to society.” Leave the DAF Paper listed below it.

 

DAFs, L3Cs – Tools of Social Impact Investing

The use of for profit entities financed by both nonprofit and for-profit dollars provide a nongovernmental free enterprise way to solve many social issues while adding to the wealth of the populace rather than depleting government funds and herald a bright future.

Check under Resources for all the papers on the L3C that are available.

These are the most recent papers relevant to the L3C that we have. If you have any you wish to submit for inclusion, please send the information including HTML links to Info@AmericansforCommunityDevelopment.org

Welcome to the new
Americans for Community Development

These are not unprecedented times – unprecedented for us, perhaps, but certainly not to our ancestors, who also experienced great world, national, and personal trauma – unlike our current crises, but yet no less demanding. J.R.R. Tolkien coined the term “eucatastrophe,” a sudden and miraculous grace that doesn’t deny the sorrow and failure, but somehow works for the joy of deliverance. Tolkien used this in a literary context, but COVID-19, economic distress, international disaster and persecution, racial injustice, protests-turned-destructive riots all underscore great opportunity for the good.

Henry Ford made a wise application: “When everything seems to be going against you, remember that the airplane takes off against the wind, not with it.” And those ‘disaster winds’ seem pretty strong in 2020.

Karen Woods

Executive Director

Admitting our bias, Americans for Community Development thinks the L3C is just one of the great potential tools built “for such a time as this” potential for new answers and approaches to great challenges. Historically, entrepreneurs have miraculously surveyed circumstances and resources that were available and did new things that provided social benefit and built a viable business as well.

There are more opportunities for social benefit than we can imagine. And in a time when many philanthropists are prioritizing their investments toward health emergencies, natural disasters, and a new paradigm for effective education – just to name a few, social entrepreneurs have a relatively new tool that operates in a business rather than donation-dependent paradigm. The L3C business model can accomplish innovative and oftentimes unprecedented approaches to great need within a financially sustainable strategy.

ACD invites you to flesh out your vision for social benefit. Then evaluate the Low Profit Limited Liability Company as a viable option for launching and bringing that vision to your neighborhood, your community, even beyond.

We welcome your investigation of the L3C. Contact us if you have questions.

Note from the Creator of the L3C

Robert M. Lang

The world of social enterprise is growing daily. I define a social enterprise as one, which combines a revenue stream with a charitable or social purpose and uses the revenue stream to further the social purpose. In my mind, the best social enterprises are ones which earn a small profit. With a small profit in hand, the owners and managers can stay focused on the mission and not fund raising. I always felt that once an organization could make its own way in the business world there was no need to be burdened by the rules and regulations of the nonprofit world. To straddle that middle zone between the pure for profit business and the nonprofit, I created the L3C – the Low-profit Limited Liability Company.

The LLC or Limited Liability Company form of organization is the most popular one used today. It provides all the liability protection of the corporation with the flexibility of a partnership. So I made the L3C a subset of the LLC form of organization. The name was selected to denote an organization, which while able to earn a profit should put its primary focus on furthering a charitable mission and because it was supporting one or more causes that normally were not likely to earn big profit, its low profit nature was highlighted. I also wanted a distinction for branding purposes that made it clear that the L3C was an organization that put mission before profit.

To be sure anyone dealing with an L3C could trust that it was in fact putting mission before profit, the attorney I hired to write the actual state L3C laws for me, Marcus Owens of Loeb & Loeb LLP, used the exact language contained in the federal code relevant to PRIs (Program Related Investments) meaning it significantly furthers the accomplishment of purposes set forth in Section 170(c)(2)(B) of the Internal Revenue Code of 1986, 26 U.S.C. § 170(c)(2)(B), and this was no accident. I realized that if L3C s were to operate as for profit businesses they would need to be capitalized like a for profit business. But the venture capitalists who usually provide the start up capital for new businesses are purely profit oriented. They want to maximize total financial return. L3C s on the other hand are about maximizing social return. So the venture capitalists for the L3C have to be ones who want to maximize total social return before profit. Two groups that can do so using dollars that would normally be allocated to nonprofit purposes are foundations and DAFs (Donor Advised Funds). The federal regulations relevant to PRIs were specifically written to describe the conditions under which a foundation could invest in a for profit if it was furthering a charitable mission and DAFs generally follow the rules for foundations.

We realized that many L3Cs would be started by individuals who, like those creating ordinary LLCs, were not oriented towards the formal corporate governance of a corporation. Further they might want to bring in as partners individuals and organizations of many types and stripes and needed a governance form with great flexibility. The LLC model also fits this requirement. The basic governance structure of the LLC and hence the L3C is something called an operating agreement. The members of the L3C, as the owners are called, create the operating agreement as a contract amongst themselves spelling out all the terms and conditions under which they will organize the business. As one of our team members, Sandy Davies of PKF O’Connor Davies likes to say, the operating agreement begins with a blank piece of paper and a pencil.

Have fun, do good, and let us know what your L3C is all about. We will happily publicize your organization on this website.

Welcome to the new
Americans for Community Development

Like most movements, the L3C Movement, draws all kinds of people and ideas. The passage of the first Low Profit Limited Liability state legislation in Vermont in 2008 was the legal beginning, but had years of intellectual and financial investment behind it. New collaborators excited by the vision of for-profit businesses with social benefit as the driving momentum, worked to pass L3C legislation in additional states and Native American tribes. And federal L3C legislation moves forward as well.

Americans for Community Development began as the professional organization to promote the L3C Movement and assist the entrepreneurs finding this new business form as an opportunity to turn their passion to impact social change into a sustainable business.

As with any substantial new approach, there are the visionaries who understand and embrace the hard work of building a business. And there are already multiple examples of L3C s, not only in the U. S., but all over the world, that are already turning great ideas into businesses worthy of investment and growth because of the way that their founders are tackling social need.

Innovations draw naysayers as well, and the L3C Movement is not without those. But there is opportunity in debate, sharpening already great innovation with new ideas and approaches to social need solutions with financial security.

We invite you to be a part of the growing L3C Movement, to share your ideas and to join us as we work with entrepreneurs of large and small operations, leaders who know that it takes all of us investing to grow the L3C.

Karen Woods

Executive Director

Note from the Creator of the L3C

Robert M. Lang

The world of social enterprise is growing daily. I define a social enterprise as one, which combines a revenue stream with a charitable or social purpose and uses the revenue stream to further the social purpose. In my mind, the best social enterprises are ones which earn a small profit. With a small profit in hand, the owners and managers can stay focused on the mission and not fund raising. I always felt that once an organization could make its own way in the business world there was no need to be burdened by the rules and regulations of the nonprofit world. To straddle that middle zone between the pure for profit business and the nonprofit, I created the L3C – the Low-profit Limited Liability Company.

The LLC or Limited Liability Company form of organization is the most popular one used today. It provides all the liability protection of the corporation with the flexibility of a partnership. So I made the L3C a subset of the LLC form of organization. The name was selected to denote an organization, which while able to earn a profit should put its primary focus on furthering a charitable mission and because it was supporting one or more causes that normally were not likely to earn big profit, its low profit nature was highlighted. I also wanted a distinction for branding purposes that made it clear that the L3C was an organization that put mission before profit.

To be sure anyone dealing with an L3C could trust that it was in fact putting mission before profit, the attorney I hired to write the actual state L3C laws for me, Marcus Owens of Loeb & Loeb LLP, used the exact language contained in the federal code relevant to PRIs (Program Related Investments) meaning it significantly furthers the accomplishment of purposes set forth in Section 170(c)(2)(B) of the Internal Revenue Code of 1986, 26 U.S.C. § 170(c)(2)(B), and this was no accident. I realized that if L3C s were to operate as for profit businesses they would need to be capitalized like a for profit business. But the venture capitalists who usually provide the start up capital for new businesses are purely profit oriented. They want to maximize total financial return. L3C s on the other hand are about maximizing social return. So the venture capitalists for the L3C have to be ones who want to maximize total social return before profit. Two groups that can do so using dollars that would normally be allocated to nonprofit purposes are foundations and DAFs (Donor Advised Funds). The federal regulations relevant to PRIs were specifically written to describe the conditions under which a foundation could invest in a for profit if it was furthering a charitable mission and DAFs generally follow the rules for foundations.

We realized that many L3Cs would be started by individuals who, like those creating ordinary LLCs, were not oriented towards the formal corporate governance of a corporation. Further they might want to bring in as partners individuals and organizations of many types and stripes and needed a governance form with great flexibility. The LLC model also fits this requirement. The basic governance structure of the LLC and hence the L3C is something called an operating agreement. The members of the L3C, as the owners are called, create the operating agreement as a contract amongst themselves spelling out all the terms and conditions under which they will organize the business. As one of our team members, Sandy Davies of PKF O’Connor Davies likes to say, the operating agreement begins with a blank piece of paper and a pencil.

Have fun, do good, and let us know what your L3C is all about. We will happily publicize your organization on this website.

Use L3Cs to create a brighter future.