A Primer on L3C - Tax Status - an alternative corporate structure with a social responsibility.

Corporate Social Responsibility or CSR, has certainly earned a name in the philanthropic lexicon. It seems that everyone has an opinion on if and how corporations should engage in social impact work.

From the corporate/for-profit perspective, the idea is that you give back to the communities of customers, employees, and the global public. This can be a pure marketing strategy that is determined to reach your customer where they're are at; or by taking on a systemic social issue that your own for-profit product development encounters to help society or the environment.

However, either as Cause Marketing or as work for Social Impact, the ultimate goal of a corporation is to maximize profits for their shareholders. So, as Public Relations or Philanthropy, it must ultimately be self-serving to the Limited Liability Corporation, or LLC, for it to truly reach corporate nirvana. A bit of a pity, but at least we know the true stripes of the animal we call a corporation. Regardless, the CSR concept begins to acknowledge the value and impact a corporation already has to the social fabric of a community and our global ecosystem. In fact, many organizations and leaders are currently dedicated to developing the standard of measures for ROI that are social and environmental.

An evolution of these ideas is a new business status of a Low-profit Liability Corporation, or L3C has made it's way into 3 states. Vermont has passed the law, Michigan is waiting for the Governor's signature, and North Carolina has it in the Senate Finance Committee. For a good definition and information on the structure, read Americans for Community Development's FAQ's on L3C. "An L³C is run like a regular business and is profitable. Unlike a for-profit business, however, the primary aim of the L³C is not to make a profit, but to achieve socially beneficial purposes. Profit is a secondary goal. The L³C thus occupies a unique niche between the for-profit and charitable sectors."

In the white paper Mobilizing Change released by the Aspen Institute in 2008, L3C status was listed as one of the top ten policy recommendations for the social/nonprofit sector in the future.

"Idea #2: Promote the growth of enterprises that mix business practices with social missions by creating a special tax code designation for social-benefit enterprises." Quoted in that article is Heather Peeler with Community Wealth Ventures who wrote The L3C: A New Tool for Social Enterprise.

Other Resources via wikipedia:

International Business Report (2008). Corporate Social Responsibility: a necessity not a choice, Grant Thornton.

Baker, Mallen. "Arguments against Corporate Social Responsibility". Business Respect. Retrieved on 2008-03-07.