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Using the L3C Organizational Model

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  1. Anita Lauricella says:

    Thanks for these insights. I have also been looking at the L3C model and trying to figure out when it would make sense. A nonprofit I founded about ten years needed to establish a wholey owned for profit subsidiary. It is not a terribly painful solution but I do question it every year when I pay the additional fees and complete the necessary filings. It would be interesting to see some side by side comparision of all the related costs and benefits.

  2. Thank you for your confident post about the L3C. I’m also studying the L3C very closely. I think non-profit arts organizations, particularly larger groups with access to capital or people with capital, could use the L3C to leverage the arts’ own well-documented economic impact for its financial benefit by creating subsidiaries that are related to arts and entertainment. Arts organizations should be able to invest in related enterprises in their downtown districts like restaurants, bars, shops, a parking garage, maybe even a hotel – businesses that people associate with going to the arts district. Without the arts as economic drivers, we know that a lot of these businesses in arts districts would go under. So why not own this space in the first place? It is interesting to me what NJPAC is doing in their commercial and residential development ventures surrounding NJPAC, sort of in that same vein. Also, don’t laugh – I think Las Vegas mega-resorts are sort of models of multiple, related ventures, all related to a united mission – entertainment – united under one mother development company. At Caesar’s Palace you have a hotel, a dozen restaurants, bars, spa, shopping mall, and several theatres (plus the casino, of course) – with profits flowing up to the mother company. Disney is another example of a mother company that owns hotels, restaurants, shopping centers, and more around its core product – theme parks – and benefits from those ventures. What if the mother company was a major orchestra? The Vegas/Disney comparisons may sound too much like apples and oranges, but like you said, it is complicated for a 501-c-3 to own a for-profit venture without diluting the mission or risking loss of nonprofit status. The L3C might be just the right vehicle for these ideas to develop.

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