A Low-Profit Limited Liability Company (L3C) is similar to a limited liability company (LLC), in which owners actively manage the company but are not personally liable for the organization’s debts. However, an L3C is a hybrid of an LLC and a non-profit business model. In a non-profit, an organization’s goal is to serve the general public and it operates without a profit motive.
The L3C has become a combination of a for-profit and non-profit business. While the company technically earns profit, it conducts business with the goal of aiding a certain cause or charitable focus. The L3C enables socially conscious businesses to operate, while also attracting funding from foundations and private investors. Additionally, L3Cs can benefit from branding and marketing that highlights them as socially responsible and will attract like-minded customers, employees, and donors who wish to work or spend money with a mission-driven company.
Company’s forming an L3C must also consider the legal requirements of this business formation. When a for-profit L3C receives investments from a foundation, the L3C is responsible for meeting the requirements of a program-related investment (PRI). The PRI makes it legal for a foundation to support a for-profit organization that conducts philanthropic activities, while also allowing the foundation to meet its annual tax obligations to give a portion of their assets to charitable causes.
Above all, the L3C provides all the tax benefits, flexibility of ownership, ease of management, and shared or sole decision making power that has long been associated with an LLC. And while benefiting from this formation business model and asset protection, L3Cs also enable for-profit companies to focus on their philanthropic or educational mission.
Wealth Support Services proudly forms L3Cs for socially-conscious companies across the United States. Contact us today to take the first step toward proper entity formation for your business.