A low-profit limited liability company (L3C) is a legal form of business entity in the United States.
[11][12] The L3C is obligated to be mission-driven by law which gives a clear order of priorities while also aligning with Lang's initial design intention of being a structure that can take donations from foundations.
[13] The L3C makes it easier for socially oriented businesses to attract investments from foundations and additional money from private investors.
[14][15] Unlike the traditional LLC, the L3C's articles of organization are required by law to mirror the federal tax standards for program-related investing.
[16] A program-related investment (PRI) is one way in which foundations can satisfy their obligation under the Tax Reform Act of 1969 to distribute at least 5% of their assets every year for charitable purposes in order to maintain their tax-exempt status.
[17] While L3Cs are a separate legal form of business entity, L3Cs structure most closely emulates that of a limited liability company (LLC).
[citation needed] The lifetime or duration of an L3C usually extends beyond the life of its members because it takes on its own legal personhood.
[19] A manager-managed selection does not necessarily mean that members lose their voting rights on material issues regarding the business unless indicated or contracted otherwise within the operating agreement.
[23] To create such a statute, legislation must be passed that amends the state's general limited liability company (LLC) law.
[4] L3C statutes currently exists in: Illinois,[24] Louisiana, Maine, Michigan, Missouri, North Dakota, Rhode Island, Utah, Vermont, Wyoming, Puerto Rico, and the federal jurisdictions of the Crow Indian Nation of Montana and the Oglala Sioux Tribe.
[27] In May, 2012, the IRS released proposed regulations that broaden the landscape of what constitutes an acceptable PRI by adding nine new examples of investments that would qualify, along with some general principles.
[29][30] The expanded clause would make Illinois the first state to authorize L3Cs whose purposes may reflect the whole range of statutorily sanctioned PRIs to include religious, scientific, and literary organizations.
[31][32][33] Legislation is also pending at federal level that will simplify the process for receiving IRS approval that an investment qualifies as a PRI.
Existing L3C businesses are in fields including but not limited to: alternative energy, food bank processing, media consulting, art funding, job creation programs, economic development, real estate, environmental remediation, and medical research.
[1] One example is SEEDR L3C, founded in 2008 in Atlanta to develop hardware, software, service, and policy solutions that help improve access to healthcare in Africa.
[43] Today, SEEDR L3C's clients and funders include the US Centers for Disease Control & Prevention (CDC), Medecins Sans Frontieres (MSF), and UNICEF.