The Governor of Illinois, recently signed into law a new bill that will allow entities to form a new hybrid corporation: the low-profit corporation. Commonly known as L3Cs, companies can qualify for the low-profit status if their primary objective is to achieve a socially beneficial purpose. L3Cs may greatly reduce the barriers some companies have in doing good work, because as they become more popular, states may pull back cause marketing registration requirements for those companies incorporated as low-profit.
Low-profits differ from for-profits in that they have a maximum financial return on investment. The potential rate of financial return on a standard for-profit company is generally 5% or greater, while fully tax-exempt companies are identified as having a 0% return. A low-profit company is both financial and mission-related, and strives for a financial return on investment of not more than 5%. An L3C can also receive philanthropic investment, so long as the investment provides a low rate of return. Vermont is also an L3 state, as is Montana, with legislation pending in Georgia, Michigan, and North Carolina.