L3C and B-Corps

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Anyone who is at all active in the Triangle business community knows we are a breeding ground for social enterprise – companies that are formed to achieve a social purpose as well as make a living for the founders. Social entrepreneurs have two cutting edge resources to available to them in North Carolina — the L3C and the B corporation. I was quoted today in an article in the Triangle Business Journal about low-profit limited liability companies, known as L3Cs.

L3Cs are limited liability companies that have both a profit-purpose and a charitable or education purpose. They were approved by the legislature on August 1, 2010. About a dozen have been formed to date here. They are intended to attract investment and funding sources that may not be available to traditional for-profit entities.

Proponents would like the L3C to become the entity of choice for “program-related investments” (known also as PRI) from private foundations. Private foundations are required by the IRS to distribute a percentage of their funds each year, either through grants, loans or other investments for mission-related activities (i.e., program-related investments). Few private foundations make loans or investments because it is cumbersome and regulation-heavy. It is easier to give outright grants. Because the L3C authorizing statutes contain certain PRI language from the Internal Revenue Code, proponents hope private foundations will begin considering funding mixed use for-profit/charitable projects by investing in L3Cs. They are lobbying to get federal tax recognition for the PRI investments in L3Cs.

Another cutting edge social enterprise concept is the B-Corporation (“B” standing for Benefit).

Please see full article below for more information.

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