Charity-Owned Companies or For-Profit Companies Devoted to Social Good?

July 23rd, 2008

Attorney Gene Takagi has a really informative blog on legal issues for nonprofit businesses.  He has a post today on LLCs owned by charities and raises some good questions about how to insulate the charity from liability (e.g. if the charity owns real estate) and whether donations from to the LLC would be deductible.

Nonprofit Law Blog: Charity-Owned Limited Liability Companies

In many ways, this structure is a complement to the B Corporation idea I have blogged about previously.  A charity-owned LLC is essentially a for-profit subsidiary of the charity, while the B corporation is a for-profit company that may provide economic benefit to charitable organizations.

I am presently working on the latter concept- a B corporation set up specifically so that it can grow as a for-profit company, but which is very closely tied to a non-profit business and provides economic benefits back to the non-profit.  As the project matures, I hope to share detailed information about the business and its structure.  I would love to write a case study comparing the relative merits of the B corporation approach with the charity-owned LLC.  It seems clear that the structures serve related but different purposes.  A primer that helped figure out which to use when could be valuable.

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