Jtm-pnw-l3c-corporate

The L3C: Can the corporation learn to achieve profits and social purpose?

These are Bill Densmore's notes for a breakout session at Journalism that Matters-Pacific Northwest.

Discussion notes (thanks to Chaitra Sriram)

Two corporate forms, binary. Dictated by wall street: have to meet investor needs Non-profits: entirely mission based: have to cover costs, but nothing more.

Have to incorporate social need into a corporate form. AP works like a co-op. But that doesn't work for everyone. Requires that the services they provide and the owners of the company have a very close relationship Agricultural co-ops and credit unions, and banks are good examples.

In the case of a company without a homogenous owner base but wants to be a co-op. What to do? L3c is for-profit. In the charter, it must say that its purpose is to perform some social good. Must put profits second and social good first. Doesn't mean you can't make a profit, only that you have to have social good. Ownership to the readers and employees.

Jennifer Towery and Robert Lang = L3c Lang: “Social benefit for profit.” L3C = Low Profit Limited Liability Company with binding rules mandating social good. Lang: Trying to get a federal law that will put PRIs on the same footing as non-profits

Jennifer Towery trying to accuire the newspaper from the Gate corporation to make it into an L3C. Journalism has to matter more than making a profit. If they were an L3c, they can accept PRIs from people that will offset other risks. Get the community to invest in the paper under the L3c business model in order to give it better quality of Journalism (depth of story)

Getting something like this in WA?

Converting other industries into L3c? americansforcommunitydevelopment.org

Densmore: Why do this? Lang: Its fun. Its a challenge to do something that is good for the people in a way that is profitable. Towery: Make a difference in journalism. You don't go into it to get rich. Find a good business model to make journalism about making a difference in the community

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Jim McGinley Ashoka: social financial enrepeneurs. Social businesses: Dannon yogurt. Production and delivery to Bangaladesh. Approach is a social business idea. There will be a profit made, but won't be a return on investment. L3C: it takes a while to get it through the legislature. It is fairly similar to a co-op. But you can see a social and business model coming together.

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L3C ownership may make it harder to sell to an entity that would profit maximize. Different tax structures involved with the sale? It may explain why a family owned newspaper might not want to go this route. Blethen Corp. owns 55% of Seattle Times stock. This leads to the problem that the children may not have the same philanthropic interest in the business as the parents may have.

L3C is just like an LLC in that there are different ways of organizing it. Community foundation can make a grant that would work like a loan and they can get a market rate of return. Or they can get stock and get on the board of the company.

Bill Richards: Is an L3C an option for Chapter 1 or Chapter 11 bankruptcy for a paper? Increases likelihood of getting a better return if the paper becomes an L3C. Foundations are wary of doing PRIs in an L3C because they are not sure about how the IRS will respond. IRS has to make decision that newspaper is a community resource in order to make it an L3C.

Community can now get involved in the paper not only by buying it but by investing in it. This allows communities to get involved in the quality of local reporting, and demand that it be for the public good instead of purely being for profit.

Bill Densmore: Network subscriptions as a way to sustain journalism. How to determine ownership of that networking company? Don't want a major corp. like Microsoft or Google or even the government. This would fit for having an L3C for ownership. Allows the organization to go to various foundations and ask for money in order to create that networking site. Any profits made would be invested in journalism

Background links

The WikiPedia page on L3C's:

• http://en.wikipedia.org/wiki/Limited_liability_company

A list of the key features of the L3C:

• http://newshare.com/wiki/index.php/L3c-vermont-background

Robert Lang: Originator of the L3C idea:

• http://www.rjionline.org/projects/densmore/stories/info-valet/stories/l3c/index.php

Home page for his AmericansForCommunityDevelopment.org:

• http://www.americansforcommunitydevelopment.org/

Jim Barnett talking about the L3C on his blog:

• http://journalismnonprofit.blogspot.com/2009/08/whither-l3c.html

Bill Mitchell covers the L3C phenomenon in a PoynterOnline piece: http://www.poynter.org/column.asp?id=131&aid=159320

Jim Barnett on NiemanLabs.org talks about the L3C for newspapers:

• http://www.niemanlab.org/2009/08/whats-keeping-news-organizations-from-trying-the-low-profit-model

ANOTHER VIEW: L3C benefits seen as available already:

• http://philanthropy.com/giveandtake/index.php?id=1188

Here's the Vermont law, which was the first:

• http://www.sec.state.vt.us/corps/dobiz/llc/llc_l3c.htm

Now law in Illinois:

• http://www.chicagotribune.com/business/columnists/chi-mon-minding-l3c-aug10,0,5321379.column

A 2005 study of ownership forms:

• http://www.mediagiraffe.org/node/230

VIDEO: Building a corporation with a social mission:

• http://newshare.typepad.com/newshare/2009/04/building-a-profitmaking-company-with-a-social-mission.html

Chris Miller, community outreach coordinator of the Skandalaris Center for Entrepreneurial Studies at Washington University in St. Louis, describes the form, which some people are saying might be a future structure for newspapers. Miller is at 314-935-6906 (clmiller@wustl.edu

Americans for Community Development
L3C ADvisors Inc.
P.O. Box 236
Granite Springs, New York 10527
(914) 248-8443
Inquiries may be directed to:
info@americansforcommunitydevelopment.org