Explore your new Business Structure
(Low-Profit Limited Liability Company)
Low-Profit Limited Liability Company
The Illinois Limited Liability Company Act provides for the creation of low-profit limited liability companies (L3C).
The L3C is essentially a subtype of a for-profit LLC that is (1) specifically organized to further charitable purposes and (2) does not have the production of income for its members as a significant corporate purpose.
Just like an LLC, an L3C can be organized as a disregarded entity or a taxable business and there is no requirement that its members be tax-exempt organizations; the statute requires only that its members seek to conduct a business activity through the L3C that furthers a charitable purpose. Since the statute anticipates that an L3C will hold charitable assets, the Act requires all L3Cs, unlike traditional LLCs, to register and file annual reports with the Illinois Attorney General’s Office under the Illinois Charitable Trust Act, unless otherwise exempt.
501(c)3 and Benefit
501(c)3 Non-Profit Corporation
These terms explain different aspects of the same organizations. A non-profit organization refers to a wide range of legal entities that are organized without shareholders or other private owners. Most nonprofits serve a public purpose, but many address private interests as might be seen in social clubs, trade associations, etc.
The expression “not-for-profit corporation” refers to a specific legal entity formed under the Illinois General Not For Profit Corporation Act of 1986.
The Illinois legislature recently enacted the Illinois Benefit Corporation Act, creating a new business entity designed to encourage social and environmental goals in addition to maximizing its profits for the benefit of its shareholders. The public benefit corporation is a taxable business entity with private shareholders that adopts a corporate purpose that creates “a material positive impact on society and the environment."
Whole Foods and Patagonia are two well-known examples of businesses that have reorganized under similarly structured statutes in other states. No special tax benefits are currently afforded to benefit corporations. However, akin to the low-profit limited liability companies, organizers may find that the good will and public image created by the use of a benefit corporation, and the changes to the fiduciary duties, warrants the additional reporting obligations.