L3Cs: THE NEXT BIG WAVE IN SOCIALLY RESPONSIBLE INVESTING OR JUST SIMPLY TOO GOOD TO BE TRUE?

David J. Schwister, Washington University in St Louis

Abstract

This article pertains to the growing popularity of Low-Profit, Limited Liability Companies (L3Cs). It includes a discussion of the potential pitfalls involved in the adoption of this organizational structure. Part I of this Article introduces a timely example that illustrates how L3Cs are gaining steam across the U.S. Part II of this Article provides a history of the L3C movement. In addition, Part II offers a look at the current legal landscape of L3Cs on a federal and state level. Part III offers a glimpse into possible problems that L3Cs may run into including registration as well as disclosure requirements with the Securities and Exchange Commission (“S.E.C.”). In addition, Part III will examine what the fiduciary obligations will be in L3Cs. Finally, Part III concludes by exploring the possibility of overlapping governmental policing that may occur as more of these entities sprout up.