Reevaluating the L3C: Mistaken Assumptions and Potential Solutions

Abstract:     
This paper tracks the development of the L3C, analyzes why the assumptions held by the proponents of the L3C have not come to fruition, and examines the possibilities to help the L3C reach its potential of opening new streams of capital for social enterprise. Part I discusses the current use of Program-Related Investments ("PRIs") by foundations in the United States. Part II examines the development of the L3C. Part III explores current status of the L3C and its underlying assumptions. Part IV analyzes certain proposed federal legislation and IRS regulations that could affect the L3C. Part V addresses the future of the L3C and proposes policies to ensure that the L3C serves its intended purpose, suggesting that any successful reforms need to focus on the distribution of the costs involved with PRIs rather than just focusing on minimizing these costs.

Number of Pages in PDF File: 26

Keywords: L3C, social enterprise, social entrepreneurship, hybrid entities, double bottom line

working papers series