Nonprofit org money maker

Nonprofit org money maker

Posted: Volex Date of post: 10.07.2017

By STEPHANIE STROM OCT. A new type of company intended to put social goals ahead of making profits is taking root around the country, as more states adopt laws to bridge the divide between nonprofits and businesses. California is the latest state to adopt a statute permitting what is called flexible-purpose corporations, new companies that are part social benefit and part low-profit entities.

The companies are now allowed under laws in more than a dozen states and two Indian tribes. States like New York and Massachusetts are weighing comparable legislation — sometimes also known as low-profit limited liability or benefit corporations — and efforts are afoot to get federal legislation passed that would lower hurdles to the creation of such companies, including a quiet push to get preferential tax treatment for them.

Many of the companies adopting the new structures provide services to nonprofits or are food purveyors that, for example, might employ the disabled. Perhaps the best known is MOO Milk , a group of small Maine dairy farmers who incorporated in Vermont as a low-profit limited liability company, or L3C.

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Unlike a straight nonprofit group, these businesses can tap into conventional capital markets as well as philanthropy. And unlike a for-profit corporation, the structure allows investors to emphasize the social mission over making money, and to be supported by money from foundations. Todd Johnson, a lawyer who is among the leaders of the movement to get states to create new legal structures.

Not surprisingly, the trend concerns some executives in charge of charities, who fear increased competition for philanthropic dollars fueled by the enthusiasm for the new formats among foundations, many of which have been lobbying hard for new laws to foster this type of business. Many corporate lawyers and regulators also are wary. The California Department of Corporation and the business law section of the corporations committee of the state bar association opposed the law, as have similar organizations in other states.

They argue that the new structure holds an inherent conflict of interest and that it will lower standards of fiduciary duty. One such company, ardentCause , was about to become a traditional limited liability company, or L.

The company, founded by three veterans of the automotive industry, develops database software to help nonprofits manage and share information. Baer said ardentCause was currently negotiating with another foundation for investment. View all New York Times newsletters. Callison wonder why a new category of businesses is necessary at all, given that foundations can make investments in standard forms of business.

A foundation may, for example, offer a business a loan at a below-market interest rate to spur it to build a factory in an economically blighted neighborhood. Also, more and more companies are incorporating socially beneficial activities into their core business strategies without abandoning their primary goal of making profits.

But charities seeking ways to reduce their reliance on donated dollars are increasingly developing programs that could be mistaken for businesses, and for them, such a structure solves a number of headaches.

It gives them access to the capital markets, allows them to pay higher compensation levels and provides potential exit strategies, all unavailable to nonprofits. One of the nonprofits it has supported, Global Integrity , is likely to spin off a project called Foglamp , which it started, into a flexible-purpose company. Hedge funds, institutional investors and global companies pay market rates for the information.

Frontline SMS took another route and organized as a community interest company, or C. Frontline was spun out of Kiwanja. Because of an editing error, an article on Thursday about low-profit limited liability corporations, a new company structure that combines elements of nonprofit and commercial entities, referred imprecisely to one such company, MOOMilk.

A version of this article appears in print on October 13, , on Page B1 of the New York edition with the headline: A Quest for Hybrid Companies That Profit, but Can Tap Charity. Order Reprints Today's Paper Subscribe. Tell us what you think. Please upgrade your browser. Sections Home Search Skip to content Skip to navigation View mobile version.

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An error has occurred. Please try again later. You are already subscribed to this email. October 18, Because of an editing error, an article on Thursday about low-profit limited liability corporations, a new company structure that combines elements of nonprofit and commercial entities, referred imprecisely to one such company, MOOMilk.

nonprofit org money maker

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