If you want to start a business with the primary goal of advancing a public benefit, explore the options available with a low-income limited liability company or a public benefit corporation—if these designations are available in your state.
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updated September 1, 2023 · 2min read
If you are planning to start a for-profit business with the goal of supporting some type of public benefit, you may have the option to organize your company as a low-income limited liability company (L3C) or a public benefit corporation.
Your choices will depend on your state laws. Only Illinois, Kansas, Louisiana, Maine, Rhode Island, Utah, and Vermont allow you to utilize the L3C and benefit corporation designations.
An L3C is a special type of limited liability company (LLC) that can operate as a for-profit venture that serves a public benefit. Similarly, a benefit corporation is a special type of hybrid corporation.
Both L3Cs and benefit corporations provide a limitation of liability. They must be created and maintained according to state law, and are subject to state and federal tax laws.
The main differences between a benefit corporation and an L3C are their management structure and record-keeping requirements, and the states in which they may be created.
A benefit corporation, like any corporation, has shareholders who contribute funds to the business, a board of directors to oversee the management of the corporation, and officers who handle day-to-day operations.
To form a benefit corporation, file articles of incorporation with the appropriate state agency. The articles should state that the business is being formed as a benefit corporation and the benefit purpose for which it is being created.
An L3C, like a traditional LLC, has members who contribute funds to the business and managers who handle day-to-day operations.
L3Cs are typically formed by filing articles of organization with the appropriate state agency. This is the same as for any LLC, except for added provisions stating that the business is being formed as an L3C and stating the benefit purpose for which it is being created.
by Edward A. Haman, J.D.
Edward A. Haman is a freelance writer, who is the author of numerous self-help legal books. He has practiced law in H...
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