Posted by:
Steve Dubb
Social entrepreneurs look to develop new legal forms for organizing socially oriented business
As Jim Fruchterman, CEO of Palo Alto, CA-based Benetech and a member of the Social Enterprise Alliance board reports, one hot area of discussion at the 8th Annual Gathering of the Social Enterprise Alliance was whether new legal structures might assist social entrepreneurs in their efforts to develop socially oriented businesses.
Held last week in Long Beach, CA, the Social Enterprise Alliance conference is the nation’s largest assemblage of social enterprises. The discussion on “hybrid” (as in somewhere between “for profit” and “non-profit”) forms was cosponsored by the Nonprofit Sector Research Fund of the Aspen Institute, which had recently held a special conference and issued a report on the topic.
One initiative profiled at the Social Enterprise Alliance conference was a proposal from North Carolina to create an “L3C” – as in “Low-profit Limited Liability Corporation,” which would be a low profit LLC specifically structured so that private foundations would be allowed to make program related investments in these firms. Because program related investments are, by definition, offered by foundations at a below-market interest rate (the difference justified, of course, by the compensating higher social return), this would provide a mechanism for socially oriented firms that were willing to restrict their profit levels to obtain below-market debt finance.
Fruchterman’s blog also reports on a host of other events associated with the conference, including reviews of plenary speeches by Tony Deifell of KaBOOM!, Carl Schramm of the Ewing Marion Kauffman Foundation, and Jonathan Greenblatt of Ethos Water.