Marc Lane provides his insight and expertise regarding the developing L3C movement in this researched whitepaper written and published by interSector Partners, L3C.
Marc Lane, attorney, entrepreneur and advocate, says that the Illinois reporting has not been a negative issue so far with his L3C clients, which he estimates to be at around 100. He actually feels like it could be a slight advantage for Illinois L3Cs to have more requirements put on them in this early stage of the L3C movement:
“It has not been problematic nor difficult; in fact, since Illinois L3Cs are subject to the Charitable Trust Act, I think it gives them something of an advantage that they can say their organizations are subject to attorney general scrutiny just as nonprofits are. That tends to bring down some defenses. Some will disagree with me on the grounds of laissez-faire—that it's a for-profit entity, and we ought not to be involved—but there is not any burden associated with this. The attorney general has better things to do than look at charities that are for-profit. But I think it could give an advantage in the respect of dealing with foundations.”
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Several entrepreneurs said they observed in the first wave of L3Cs (2008 to 2010 or so) there were more straight startups that seemed to have no connection to existing agencies, which some found surprising. As the designation has evolved slightly, there have been more instances of interconnectedness between L3Cs and existing 501(c)(3) nonprofits, foundations or for-profit businesses:
“I'm starting to see increasing embracing of the form by major nonprofits. Early on, I saw a lot of social entrepreneurs as kind of a startup situation. Now that continues, but we are seeing significant nonprofits using it as for-profit subsidiaries to isolate activities for asset protection purposes. So I think there is a greater buy-in in the established nonprofit community…As we see more and more organize for reasons other than capital formation, those latter are looking at other funding approaches or bootstrapping it, or they may be serial entrepreneurs with multiple companies. It's increasingly a less monolithic universe than we might have originally expected.”
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