An exciting new concept was recently born in the State of Vermont, where our firm also has an office. Vermont is the first of the 50 states to allow low profit limited liability companies to organize as a “L3C.”
The basic purpose of a L3C is to signal foundations and other 501(c)(3) qualified donors that the entity formed under these provisions will conduct their activities in a way that will qualify it for program related investments. This is important, as 501(c)(3) foundations and donors typically can only give to other 501(c)(3)s or closely related programs. A L3C is not a 501(c)(3), but an entity designated to be “low profit” and with charitable and educational goals. As the importance of solving our community’s problems grow, the need for this type of social enterprise becomes all the more apparent. Utilizing a L3C device is an exciting new way to accomplish the goal. Non-Profit organizations in New Jersey and other states should watch for this change here and encourage our legislators to enact a new L3C law.
Thomas M. Wells is the Senior Partner of WJ&L who works in both our New Jersey and Vermont offices. Among his areas of expertise is his practice in the non-profit area.