7 Billion Friends

To L3C or Not To L3C, That, Is…Confusing

Hokay, so. I have an open question. When I started working on LOVELAND I incorporated an LLC in Michigan called Why Don’t We Own This? as the legal entity behind it.

A lot of people have asked why LOVELAND isn’t set up as a nonprofit. Well, I have experience working at a nonprofit and two early-stage for-profits (one from scratch as a co-founder working directly with venture capital). While I never got terribly deep down into the technical guts and limits and loopholes of each, I know the broad strokes, and I know the way they feel and how they operate and what they value and what the shareholders want in either case.

I knew that with LOVELAND I wanted to be commercially self-sustaining, to be free to advertise and sell things and entertain and make money etc etc. I also knew that I wanted to be artistic and educational and cooperative and charitable etc etc.

So basically I wanted both worlds (my mind does this a lot). Legally, it seems the best way to do this is to be for-profit, like an LLC, and “just be cool, maaannn”, but then you don’t get some of the advantages of a nonprofit (which range from the soft stuff like how people view you and your intentions, to the hard stuff like eligibility for foundation money).

But recently I was introduced to a third option between the two called an L3C, or low-profit limited liability corporation. You can see it on Wikipedia here. A couple quick points:

[An L3C is] a hybrid legal structure combining the financial advantages of the limited liability company, an LLC, with the social advantages of a non-profit entity.

OK.

As of September, 2009, an L3C can only be formed in the states of Michigan, Vermont, Wyoming, Utah, the Crow Indian Nation and the Oglala Sioux Tribe. On August 4, 2009, Gov. Pat Quinn signed Illinois’ L3C Bill SBO239 and the law will take effect on January 1, 2010.

OK.

So it’s a combination structure, and it’s brand spanking new and untested (Michigan, Vermont, Wyoming, Utah, the Crow Indian Nation and the Oglala Sioux Tribe? Jeez, I’ll bring the cheetohs and see y’all in my living room at 8!).

In common English what I understand, and what intrigues me, is that you’re allowed to make and sell things and do business like an LLC (but you can only make a certain amount of profit on top of operation costs, and you have to follow some sort of social mission or guidelines in your actions) and in addition to customers in the marketplace, you can also raise money from foundations and other donors who would normally give to nonprofits with similar missions (but it seems like the taxes don’t work out quite as well for you or your donors — I’m a little unclear here).

I’m very interested in hearing more stories about and from people who’ve started L3Cs. If it looks good, maybe LOVELAND will jump in that direction and fly the nascent L3C flag. I’ll keep poking through the information, but I don’t see any lists of established L3Cs. If you’ve got knowledge, connections, or run one of these bad boys please get in touch. I’d love to talk.

Til then I’ll be reading out the corner of my eye and watching these videos: