The buzz is slowly starting to take off on L3C’s- “low-profit” limited liability corporations. I thought I’d spend a quick minute mentioning the option here, even though it has yet to come to Iowa. In total, there are only 5 states with L3C legislation on the books – Vermont, Michigan, Utah, Wyoming, and most recently Illinois.

Iowa doesn’t have the option, nor does one seem to be close with all of the other budget problems we have to deal with at this point in time. But I think it still bears some attention for us, as something we may want to consider down the road.

L3C’s have only been around a couple years and are thus slowly gaining steam, but the concept is pretty cool, nonetheless. Its basically a “tweener” stage in terms of profitablilty and structure between the non-profit world and traditional for-profit corporations. The main definable niche they fill is as a vehicle for companies whose primarily goal is to do good and whose secondary goal is to make money.

The L3C status allows for a much broader range of funding sources to be able to invest in the business. Besides the traditional banks, VC’s, and angel investors; L3C’s are also able to accept funding from foundations and endowments. In the case of foundations and endowments, an L3C can be a pretty attractive investment as they are usually able to lend the money rather than outright gift it to the organization through a vehicle called a “program-related investment” (PRI).

So for those of you out there who would label yourself as a social entrepreneur, an L3C status, whenever it comes down the pike, could be the perfect solution to your legal entity problems.