46 Pages Posted: 17 Feb 2012 Last revised: 21 Feb 2012
Date Written: February 13, 2012
In the past, United States “for-benefit” entities were generally organized as non-profit corporations. The same choice is available in the United Kingdom, but the entity’s purpose is traditionally limited to charities. However, a true non-profit entity does not allow an investor to receive any return on her investment, i.e., all “profits” are redistributed to the entity and not to its members/investors. In the present economy, entrepreneurs increasingly wish to invest capital in socially responsible businesses and to receive an internal return - a true admixture of “profit” and “social benefit.” In addition, these “social entrepreneurs” increasingly seek capital from private investors or foundations with “program related investments” or, “PRIs,” that include low-interest loans or loan guarantees to non-profit charities or organizations engaged in socially beneficial efforts. Examples of hybrid organizations blending “profit” with “benefit” in the United States include the “B,” or “benefit,” corporation, and the L3C. Each of these hybrid entities carries significant pre-packaged disadvantages.
The thesis of this Article is that presently the Delaware LLC provides global investors maximum internal efficiency as well as asset protection at a decreased agency cost for businesses operating solely within or outside the United States for socially driven enterprises. The Delaware LLC offers contractual freedom to investors, managers, owners, funds and foundations to structure a for-benefit, for profit socially responsible business internal plan with limited liability for owners and investors, including maximum tax efficiencies within the United States or the United Kingdom due to its completely mobile, contractual character.
Keywords: limited liability companies, Delaware, LLC, socially responsible businesses, non-profit businesses, businesses, corporations, L3C
JEL Classification: K22, K2, L3
Suggested Citation: Suggested Citation
Conaway, Ann E., The Global Use of the Delaware Limited Liability Company for Socially Driven Purposes (February 13, 2012). William Mitchell Law Review, Vol. 38, p. 772, 2012; Widener Law School Legal Studies Research Paper No. 11-03. Available at SSRN: https://ssrn.com/abstract=2004651
By Paul Miller
By Thomas Hazen