A father with a teen-age son was in a quandary. Son, recently rendered disabled as a result of a central nervous system virus, needed funds to pay for his rehabilitation and ongoing medical care. Dad, a very successful technology professional with his own company, did not have the time or the resources to provide for the son as he would like. He also did not have insurance coverage which would take care of son’s long-term needs. However, if father were to leave his business and take on another job with a larger company, the lapse in coverage would have been detrimental to his son’s current care. Additionally, the father wanted to help other families who have experienced the same trauma by supporting medical research. Father needed to find to address his son’s needs without financial ruin for himself and declining medical care for his son.
We recommended he form an a “low-profit” limited liability company, or an L3C. This is a form of the traditional LLC which combines the benefits of an LLC and those of a non-profit corporation. More specifically, the L3C is a creature of state statute which requires the entity’s members to adhere to an explicit charitable purpose over the pursuit of profits. However, the L3C may pursue program-related investments from private foundations as a component of its business structure. As such, private foundations may satisfy their IRS regulatory requirements by donating to L3Cs. In this way, L3C’s may attract more socially conscious businesses to put forth capital, and still generate some return.
While not all states recognize L3Cs, 11 states do. Client decided to change his business structure from a traditional LLC to this new structure. In addition, client now focuses his business on the charitable purpose of using his IT consulting skills to support those industries which provide medical research and services for his son’s disability.
Father’s new L3C provides him with an occupation and income to continue to support himself and his family. In addition, he directly supports the medical research and care which is so needed by his son. Client also has the satisfaction of knowing that he is assisting other families in the same regard – by simply doing his professional work.
Today, father and son are doing quite well and continue to make great strides at recovery for all with this type of disability.
The “good corporate citizen” is not dead, yet! And, with the help of L3Cs, more companies can meet both for-profit and non-profit objectives with the same endeavor.