Since the L3C appeared on the social venture scene last year, this new corporate form has been catching on. One of the latest L3C entrants is interSector Partners, L3C, a Colorado-based consulting firm headed by Rick Zwetsch and Caryn Capriccioso. The new firm is offering education and consulting services to nonprofits, for-profits, and government agencies. They also plan to consult with any new ventures exploring the L3C route.
The L3C is a new form of limited liability company which combines the best features of a for-profit LLC with the socially beneficial aspects of a nonprofit. Robert Lang, CEO of the Mary Elizabeth & Gordon B. Mannweiler Foundation, Inc. who created the L3C calls it “the for-profit with a nonprofit soul.” This hybrid business form is designed to attract a wide range of investment sources from foundation Program Related Investments (PRIs) through to conventional investors seeking market-rate returns. Last year, Vermont became the first state to recognize the L3C as a legal corporate structure, and similar legislation is pending in other states.
Addressing the Triple Bottom Line
interSector Partners, L3C’s services focus on positively impacting organizations’ bottom lines – whether they be financial, social or environmental – by looking at how their other bottom lines can influence their primary focus. The firm is offering services that include:
* Strategic partnership development
* Training and facilitation
* Business planning
* Strategy and strategic planning
* Social responsibility program development
* Social media/networking
* Marketing/communications planning
* Earned income/social enterprise services
* Fundraising consulting (focus: individual donors)
* Board governance
In our ongoing mission to highlight new L3Cs and spread awareness of this new corporate form, Triple Pundit recently spoke with interSector Partners:
Triple Pundit: Why was it important for you to incorporate using the L3C form?
interSector Partners: We chose the L3C business model both as a statement of our principles and for the potential to attract foundation PRI.
In our early stages as an L3C, we will be focused on developing and building our core education and consulting business, but we do anticipate opportunities for PRI down the road as we look at business expansion, product development and strategic community partnerships. Even more exciting is the opportunity for layered investments in specific projects that can leverage the power of foundation PRI to access socially responsible investors and ultimately market rate investors.
3P: How would you respond to L3C critics who see it only as a special purpose structure and not yet tested through the IRS tax process?
interSector Partners: When we decided to become an L3C, we knew we’d face a lot of skepticism about the model, its pros and cons and the value of L3Cs. As early adopters of this model, we believe strongly that part of our mission is to educate others about its value, to test the waters and report out on our challenges and success in working as an L3C.
Ultimately, we support all sectors learning from and utilizing the best that the others have to offer. If the best way for a company to achieve social mission is through a traditional LLC, we’re all for going that route. As for limitations placed on L3Cs, the only one is that profit be a secondary motive to social mission – we’re on board with that philosophy and approach.
3P: Is Colorado offering L3C incorporation?
interSector Partners: The company was incorporated in Vermont but is located in Colorado. With recent passing of legislation in Michigan and Wyoming, we explored forming in those states as well, but they weren’t quite ready for us. interSector Partners is somewhere around the 40th L3C to be formed in Vermont and the first one operating from Colorado. Efforts are underway to bring L3C to Colorado, and we’ll happily be on board supporting this movement with our colleagues in the field.
Nearly everyone we talk with about L3Cs requires a quick primer on the model and the purpose. From the attorney we consulted to our banker to local foundations, we’re telling the L3C story. Finding attorneys or advisors knowledgeable in L3Cs would be tough right now, but that’s changing fairly quickly and we hope we’re playing a part in building the knowledge base.
3P: An L3C is centered around a social mission written into its governing documents, so what is your mission?
interSector Partners: Our social mission is to provide inter-sector education and consulting services designed to help nonprofits become more sustainable, businesses become more socially responsible and governments to support both sectors in the community. Our services will bring the best of our experience to bear on the needs and opportunities our clients face.
3P: You’ve just recently launched, so how’s it going so far?
interSector Partners: Since opening our phone lines for business on March 2, we’ve been selected to work with two local nonprofits; one for board governance work and another for a stakeholder assessment and planning work based on the assessment results. We’re also in conversation with an international socially responsible business to provide partnership assessment and development work, as well as with area nonprofits in support of their requests for reinvestment and recovery act funding.
Good Luck to the Freshman Class
We hope the L3C continues to catch on. The future of socially-oriented ventures will depend on finding innovative forms like the L3C to connect social needs with capital sources. April is test time for the freshman class of L3Cs formed in 2008 who are just now going through their first tax filing process. If they have received foundation PRIs, the IRS must validate these as legitimate foundation investments. If this process becomes burdensome, foundations could be discouraged from investing PRI money in L3Cs.
You can learn more about L3Cs and PRIs in previous Triple Pundit posts (here and here). And L3C watchers should stay tuned, as we’ll be reporting back on the IRS’s handling of foundation PRIs.