Academic journal article Southern Law Journal

Business Organizations in the 21st Century: A Look at New Legal Forms for Business That Enhance Social Enterprise

Academic journal article Southern Law Journal

Business Organizations in the 21st Century: A Look at New Legal Forms for Business That Enhance Social Enterprise

Article excerpt

It is not the strongest of the species that survive, nor the most intelligent, but the ones most responsive to change}

I. Introduction

Change is difficult, but necessary and valuable, to progress. The 21st Century has brought many changes, including a shift in business philosophy, particularly evident with entrepreneurs becoming interested in more than the bottom line. Historically, the predominant purpose of business entities and the laws that create and regulate them has been long-term growth and shareholder profit. However, the view that business organizations should also focus on the betterment of society, and consider other factors as well, such as employees, community and the environment, is taking hold. To accommodate these broader business goals it is necessary to modify the legal forms available for business entities. To that end, three new legal structures have been developed: the low-income limited liability company (L3C), the benefit corporation and the flexible purpose corporation.

Common forms of business organizations include the sole proprietorship, the partnership, the corporation and the limited liability company (LLC), each of which is created using the laws of the state where the business is organized. State legislatures are beginning to recognize that changes in business organization laws are necessary to provide legal forms that support social enterprise and accommodate the growing interest in, and attention to, the triple bottom line (economic, social and environmental goals). The L3C offers changes to the LLC format in an effort to create small businesses interested in social good, and to increase the amount of non-profit dollars that can be invested in business ventures. The benefit corporation and flexible purpose corporation offer changes to corporate law in an effort to shift the primary purpose of the business venture to permit social and environmental objectives and relieve it from primarily shareholder value obligations.

The ideas of sustainability and social benefits as business goals are also gaining the attention of the general public, who want to work for companies and purchase from brands that match their values. Companies are marketing their social and environmental accomplishments to entice consumers to buy their products or support their businesses. For example, Procter & Gamble, makers of Pantene Nature Fusion Pro-V Shampoo and Conditioner, boast their "new plant-based bottles make a healthy choice for the planet."2 Hitachi IT Solutions advertises that they are "improving the environment...for future generations," and explain that they "...manage global infrastructures more efficiently and make our cities safer, cleaner and more sustainable."3 All companies want to be perceived as concerned with the environment and society. However, not all companies and their commitments to the triple bottom line are created equal. While only publicity stunts for some companies, others take the betterment of society and the stewardship of the environment to heart in their business operations. These foster the idea that modem business organization structures are necessary to allow socially beneficial enterprises to become part of the norm and to parade their distinction as such.

This article introduces the basic concepts of the L3C, the benefit corporation and the flexible purpose corporation. It reviews the statutory language behind their formation and describes the origins of each. The article also includes examples of companies that have formed under these new laws and discusses the different types of business ventures that are suited for organizing as one of these new structures. The article concludes that these new entities reflect a change in business philosophy that is welcome, beneficial and good for business. There is enormous potential for having a positive impact on society and the environment while making money.

II. The Low-income Limited Liability Company (L3C)

The low-income limited liability company (L3C) is a business structure that expands the limited liability company (LLC). …

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