Comments on: The L3C: A More Creative Capitalism

By: L3C and B-Corp « Sustainability Translations

L3C and B-Corp « Sustainability Translations — Sat, 06 Mar 2010 02:04:38 +0000

[...] L3C stands for “Low-profit Limited Liability Company”. It functions as a Limited [...]

By: robertlynschultz

robertlynschultz — Sun, 21 Feb 2010 20:23:12 +0000

Interesting Read! Thank You.

I heard about this L3c concept a week ago, and I am thinking that this may be the way to go in establishing a program for homeless veterans ( WOLF Camp – http://robertlyn-schultz.newsvine.com/_news/200...) that I have been working on for the past two years (or so).

By: Do L3Cs hold any promise for filmmakers? : DocumentaryTech

Do L3Cs hold any promise for filmmakers? : DocumentaryTech — Tue, 27 Oct 2009 13:33:58 +0000

[...] Witkin, writing for TriplePundit, assessed it this way: The goal of the L3C form is to bring together a mix of investment money from [...]

By: Jim Witkin

Jim Witkin — Thu, 13 Aug 2009 22:07:55 +0000

Jeff, the Americans for Community Development is the primary advocacy group for the L3C, and they have a legislative watch on their website that shows the status of the L3C in various states:

http://americansforcommunitydevelopment.org/legislativewatch.html

By: Jeff Lopez

Jeff Lopez — Thu, 13 Aug 2009 21:08:42 +0000

Do you happen to know what states will allow or you can register as a L3C?

By: GrannyPants

GrannyPants — Tue, 30 Jun 2009 21:39:01 +0000

The jury is still out, but it looks like a great possibility in a more altruistic time!

By: Jason Bradfield

Jason Bradfield — Mon, 16 Mar 2009 00:47:07 +0000

I have just learned about the L3C, so I am still trying to figure out its pluses and minuses.
There seems to be substantial resistance to custom legal documents among entrepreneurs and investors. So although customized approaches make sense and have been successful they may be a hard sell to a wide swath of donors, investors, and entrepreneurs.
The L3C addresses the need for a standard form that all parties can understand. That limits flexibility, but increases donor and investor confidence as well as reducing the costs associated with customization.
It has drawbacks like any corporate form, but seems promising if for-profit investors can get a reasonable return on their risk capital.

By: Allen Bromberger

Allen Bromberger — Wed, 11 Mar 2009 23:51:21 +0000

Allen’s response: I don’t think I was taking a “swipe” at the L3C concept merely by pointing out that one needs to be careful to make sure that it fits what one needs before adopting the form. I’d say exactly the same thing about a nonprofit corporation or a business corporation. It’s just common sense.
If you don’t think that limiting the activities of a business form to “low profit” activities is a significant drawback, I’m not sure what to say. There are a lot of ways to incorporate social purposes into legal documents and to limit return on investment if that is your goal. I do it all the time. But writing it into the law is too inflexible and ties the hands of managers and makes it very difficult to raise capital other than PRI’s from private foundations, of which there are precious few. That’s a significant drawback in my view.
I have done a lot of social enterprise deals and many of them involve creative approaches to embedding social purposes into a company’s DNA, and we’ve done some very creative things with financing, too. We haven’t used L3C’s for any of this, and quite honestly, I don’t see how we could. That’s a significant drawback to me.
I am sure that if people look past the hype to evaluate the L3C on its own merits, they can draw their own conclusions about whether or not it is right form for them.

By: Robert Lang

Robert Lang — Wed, 11 Mar 2009 13:59:34 +0000

It is odd that Allen takes swipes at the L3C since he made positive contributions to its creation when I first started developing the idea. There is no one size fits all vehicle for anything but I do not understand his unexplained comment on significant drawbacks. It always bothers me when people throw out a negative like that without explanation. No, I would not advise using the L3C if high profit were your goal but I think if the last 10 years have taught us anything it should be that too much emphasis on profit is a recipe for disaster. We might consider the words of Peter Drucker who was a proponent of a balance life:” Suppliers and especially manufacturers have market power because they have information about a product or a service that the customer does not and cannot have, and does not need if he can trust the brand. This explains the profitability of brands.” The L3C is a brand to let everyone know that you are about more than making money. It brings the metrics of a for profit to the social sector and you can make a lot of money, it is not forbidden. It just should not be your primary purpose.
What are the significant disadvantages, Allen, besides depriving lawyers of the income they receive from making custom operating agreements?

By: Allen Bromberger

Allen Bromberger — Wed, 28 Jan 2009 12:17:16 +0000

Actually, you want to be careful with the L3C. If you are primarily seeking PRI’s, an L3C might be useful. But for almost any other purpose, it has significant drawbacks, including the fact that it is formed solely for the purpose of conducting low-profit activities. While it is indeed a creative idea, the L3C is really just a special-purpose vehicle not suitable for general use. You can do much the same thing by building a social purpose into your LLC operating agreement and customizing it to your specific needs and business model.

By: kevin jones

kevin jones — Wed, 21 Jan 2009 10:57:50 +0000

I’m kind of interested in this concept. I’ll be very interested when I see an LC3 results in a PRI that would not have happened otherwise. Between that time I will be open to more reasons to be interested, as they hit relevant milestones. If it can move money to mission in a real way, I’ll be excited by it.

By: david bruce

david bruce — Sun, 18 Jan 2009 02:20:31 +0000

The concept of the L3C is as Matt West points out, a good example of Creative Capitalism. L3C could also be nicely incorporated within another capitalization structure recently published here http://www.triplepundit.com/pages/the-new-new-deal-a-cooperative-approach.php.

By: blathra

blathra — Fri, 16 Jan 2009 03:05:22 +0000

Hugh, I hope you are right about Obama’s IRS embracing the L3C concept. Good luck with your venture.

By: Hugh Simpson

Hugh Simpson — Fri, 16 Jan 2009 01:56:57 +0000

Yes, we are pursuing the LC3 form of Social Enterprise for our new dome kit manufacturing business we will be starting in the western NC mountains.
I’m thrilled to see that other organizations are pursuing this avenue too and that other states will consider this innovative form.
I think that the Obama Administration will be more open to the LC3 through the IRS than the Bush Administration.