A low-profit limited liability company (L3C) is a legal form of business entity in the United States that was created to bridge the gap between non-profit and for-profit investing by providing a structure that facilitates investments in socially beneficial, for-profit ventures while simplifying compliance with Internal Revenue Service rules for program-related investments, a type of investment that private foundations are allowed to make.
Why this Matters
For My OrganizationThe L3C is designed to make it easier for socially oriented businesses to attract investments from foundations and additional money from private investors. Unlike the traditional LLC, the L3C’s articles of organization are required by law to mirror the federal tax standards for program-related investing. ] 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. While foundations usually meet this requirement through grants, investments in L3Cs and charities that qualify as PRIs can also fulfill the requirement while allowing the foundations to receive a return.
For New OrleansL3Cs can stretch the reach of market forces so that more people can make a profit, or at least make a living, by providing solutions to our public needs in Louisiana.
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