USA: Third sector seeks business-charity hybrid

As the lines between the nonprofit and for-profit worlds blur, social-enterprise leaders continue to look for new legal structures that are better suited to such blended activities than current designations.

The topic was one of many discussions here at a meeting of more than 530 charity and business leaders gathered this week in Boston, USA, for the Social Enterprise Alliance?s annual summit. The conference focused on ways in which non-profit groups can diversify their sources of revenue by charging fees for the services they provide and starting businesses related to their charitable activities.

One proposed legal structure discussed at the meeting ? the low-profit, limited liability company, or L3C ? is designed to increase the number of program-related investments, or PRI?s, that foundations make in social-purpose businesses by making those enterprises easier to find. Proponents hope that foundation investment in those ventures would, in turn, would spur an influx of private capital.

To gain the proposed designation, which would be a new type of limited-liability corporation, the venture would have to state in its organizing document that its primary mission was charitable, and that making money was a secondary concern. The entity would have to pay taxes on profits, but, unlike a charity, it would be free to distribute those profits to owners or investors.

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