Illinois Introduces L3C Form of Business

By: Charles S. Mombo
@charlessmombo, @burnedbrass

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The Low-profit, limited liability corporations (L3Cs) are fast becoming the organizational structure of choice for Illinois’ social entrepreneurs.

On August 4, 2009, Illinois Governor Pat Quinn signed into law a new form of business which took effect on January 1, 2010. The Low-profit, limited liability corporations (L3Cs) are fast becoming the organizational structure of choice for Illinois' social entrepreneurs.

L3C allows the incorporation of low-profit, limited-liability companies, or L3Cs, a new hybrid structure for-profit ventures that have a primary goal of achieving a socially beneficial purpose.

Robert Lang, one of the architects of L3C refers to it as "the for-profit with a nonprofit soul." One of the advantages of L3Cs is that it allows funding from sources that have traditionally been hard to tap such as foundations. The “first movers” to introduce L3C, in order of start date, are Vermont, Michigan,Utah, Wyoming, Illinois, and New York.

Although Illinois does not list the amount of L3Cs that are registered in their database, Vermont, on the other hand has listed 70 L3Cs which includes a chess camp, theater, alternative energy companies, publishers, food companies and numerous consulting firms.

Do not look for an application form that says L3C just yet. The State of Illinois Business Services uses Form LLC-5.5 with a slight modification. A company intending to either form as or amend to become a low-profit limited liability company must include the term L3C in lieu of LLC or L.L.C. in its title and also include the following three statements as part of its purpose in Article 5 of the Articles of Organization:

The company intends to qualify as a low-profit limited liability company pursuant to Section 1-26 of the Limited Liability Company Act and shall at all times significantly further the accomplishment of one or more charitable or educational purposes within the meaning of Section 170(c)(2)(B) of the Internal Revenue Code of 1986, or its successor, and would not have been formed but for the relationship to the accomplishment of such charitable or educational purposes.
No significant purpose of the company is the production of income or the appreciation of property.
No purpose of the company is to accomplish one or more political or legislative purposes within the meaning of Section 170(c)(2)(D) of the Internal Revenue Code of 1986.

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