senate Bill S5097

Amended

Relates to enacting provisions relating to the formation of low-profit limited liability companies

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Bill Status


  • Introduced
  • In Committee
  • On Floor Calendar
    • Passed Senate
    • Passed Assembly
  • Delivered to Governor
  • Signed/Vetoed by Governor
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actions

  • 08 / May / 2013
    • REFERRED TO CORPORATIONS, AUTHORITIES AND COMMISSIONS
  • 08 / Jan / 2014
    • REFERRED TO CORPORATIONS, AUTHORITIES AND COMMISSIONS
  • 03 / Mar / 2014
    • AMEND AND RECOMMIT TO CORPORATIONS, AUTHORITIES AND COMMISSIONS
  • 03 / Mar / 2014
    • PRINT NUMBER 5097A

Summary

Enacts provisions relating to the formation of low-profit limited liability companies which further the accomplishment of one or more charitable or educational purposes.

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Bill Details

Versions:
S5097
S5097A
Legislative Cycle:
2013-2014
Current Committee:
Senate Corporations, Authorities And Commissions
Law Section:
Limited Liability Company Law
Laws Affected:
Amd §§102, 203, 204, 211 & 701, Lim Lil L

Sponsor Memo

BILL NUMBER:S5097

TITLE OF BILL: An act to amend the limited liability company law, in
relation to low-profit limited liability companies

PURPOSE: To authorize the creation of a new kind of company, the
low-profit limited liability company.

SUMMARY OF PROVISIONS:

Section 1 Amends § 102 of the Limited Liability Company Law § 102 by
adding a new subdivision (ii) to define "Low-profit limited liability
company" as an LLC that satisfies at all times the following
requirements: (i) to accomplish one or more charitable or educational
purposes within the meaning of section 170(c)(2)(B) of the Internal
Revenue Code, and would not have been formed but for its relationship
to the accomplishment of charitable or educational purposes; (ii) its
purpose is not the production of income or the appreciation of
property; and (iii) does not engage in political activities or or
legislative purposes within the meaning of IRS code 170(c)(2)(D).

Section 2. Amends § 203(e) of the limited liability company law by
adding a new paragraph (7) as a statement of purpose of formation of
the company that the company is a low-profit limited liability
company.

Section 3. Amends 204 of the Limited Liability Company Law § 204 by
adding a new subsection (j) to require that the company shall include
in its name the words "low-profit limited liability company" or the
abbreviations "L3C" or "L3C", with or without periods or other
punctuation.

Section 4. Amends 211(d) of the Limited Liability Company Law by
adding a new paragraph (9) to allow amendment of the articles of
incorporation if needed to meet any of the requirements set out in
section 102(o) (Majority in interest of the members).

Section 5 Amends 701(a) of the Limited Liability Company Law by adding
a new paragraph (6) to allow dissolution if the limited liability
company is a low-profit limited liability company that has ceased to
meet any of the requirements set out in section 102(o) of this chapter
and has failed for 90 days after ceasing to meet those requirements to
file articles of amendment with the department of state amending its
name to conform with the requirements of section 204 of this chapter
governing limited liability company names.

EXISTING LAW: New bill.

JUSTIFICATION: In today's economic climate, it is important for public
policy, business, and nonprofit leaders to think creatively and to
implement innovative, responsible investment ideas that will empower
entrepreneurs, and private sector investors to invest in socially
responsible opportunities that also reduce risk. The L3C is an
important tool to accomplish these socially responsible economic
goals. The L3C or Low-Profit Limited Liability Company is law in five
states and several other states are considering passing this
legislation. The L3C operates in the space between a nonprofit


organization and a for-profit entity. The L3C is designated as
low-profit with charitable or educational purpose and can have
multiple applications and benefits. The L3C has been called the
"for-profit with a nonprofit soul" by its creator Robert Lang.

The L3C is a type of LLC. It is a for-profit entity, not a charity or
nonprofit entity, and is treated as an LLC for legal and tax purposes.
It is flexible, designed to allow a mix of foundations, trusts,
endowments, pension plans, individuals, corporations, and governmental
entities to partner in order to achieve social objectives while
operating in a for-profit business structure. It has the liability
protection of a corporation and the flexibility of a partnership, but
unlike a standard LLC, it is explicitly formed to further a socially
beneficial purpose and qualify as a Program Related Investment from
private foundation partners. This flexible structure allows for
greater financing structures to be utilized in structuring social
ventures. In short, it is a new legal entity combining financial
advantages of an LLC with social advantages of non-profit.

FISCAL IMPLICATIONS: None.

EFFECTIVE DATE: Immediate.

view bill text
                    S T A T E   O F   N E W   Y O R K
________________________________________________________________________

                                  5097

                       2013-2014 Regular Sessions

                            I N  S E N A T E

                               May 8, 2013
                               ___________

Introduced  by  Sen.  GOLDEN -- read twice and ordered printed, and when
  printed to be committed to the Committee on Corporations,  Authorities
  and Commissions

AN  ACT  to amend the limited liability company law, in relation to low-
  profit limited liability companies

  THE PEOPLE OF THE STATE OF NEW YORK, REPRESENTED IN SENATE AND  ASSEM-
BLY, DO ENACT AS FOLLOWS:

  Section 1. Section 102 of the limited liability company law is amended
by adding a new subdivision (ii) to read as follows:
  (II)  "LOW-PROFIT LIMITED LIABILITY COMPANY" MEANS A LIMITED LIABILITY
COMPANY THAT HAS SET FORTH IN ITS ARTICLES OF  ORGANIZATION  A  BUSINESS
PURPOSE  THAT  SATISFIES,  AND THAT IS AT ALL TIMES OPERATED TO SATISFY,
EACH OF THE FOLLOWING REQUIREMENTS:
  (I) THE LIMITED LIABILITY COMPANY SIGNIFICANTLY  FURTHERS  THE  ACCOM-
PLISHMENT  OF  ONE OR MORE CHARITABLE OR EDUCATIONAL PURPOSES WITHIN THE
MEANING OF SECTION 170(C)(2)(B) OF THE INTERNAL REVENUE CODE OF 1986 (26
U.S.C. S 170(C)(2)(B)), AND WOULD NOT  HAVE  BEEN  FORMED  BUT  FOR  ITS
RELATIONSHIP   TO   THE  ACCOMPLISHMENT  OF  CHARITABLE  OR  EDUCATIONAL
PURPOSES;
  (II) NO SIGNIFICANT PURPOSE OF THE LIMITED LIABILITY  COMPANY  IS  THE
PRODUCTION OF INCOME OR THE APPRECIATION OF PROPERTY; PROVIDED, HOWEVER,
THAT  THE  FACT  THAT THE LIMITED LIABILITY COMPANY PRODUCES SIGNIFICANT
INCOME OR CAPITAL APPRECIATION  SHALL  NOT,  IN  THE  ABSENCE  OF  OTHER
FACTORS,  BE  CONCLUSIVE EVIDENCE OF A SIGNIFICANT PURPOSE INVOLVING THE
PRODUCTION OF INCOME OR THE APPRECIATION OF PROPERTY; AND
  (III) NO PURPOSE OF THE LIMITED LIABILITY COMPANY IS TO ACCOMPLISH ONE
OR MORE POLITICAL OR LEGISLATIVE PURPOSES WITHIN THE MEANING OF  SECTION
170(C)(2)(D)  OF  THE  INTERNAL  REVENUE  CODE  OF  1986  (26  U.S.C.  S
170(C)(2)(D)).

 EXPLANATION--Matter in ITALICS (underscored) is new; matter in brackets
                      [ ] is old law to be omitted.
                                                           LBD10810-01-3

S. 5097                             2

  S 2. Paragraph 7 of subdivision (e) of  section  203  of  the  limited
liability  company  law, as added by chapter 470 of the laws of 1997, is
amended to read as follows:
  (7)  IF  THE  COMPANY  IS  A  LOW-PROFIT LIMITED LIABILITY COMPANY, AS
DEFINED IN SUBDIVISION (II) OF SECTION ONE HUNDRED TWO OF THIS  CHAPTER,
THAT THE COMPANY IS A LIMITED LIABILITY COMPANY; AND
  (8)  any other provisions, not inconsistent with law, that the members
elect to include in the articles or organization for the  regulation  of
the  internal  affairs  of the limited liability company, including, but
not limited to, (A) the business purpose for which the limited liability
company is formed, (B) a statement of whether there are  limitations  on
the  authority  of  members or managers or a class or classes thereof to
bind the limited liability company  and  (C)  any  provisions  that  are
required  or  permitted to be included in the operating agreement of the
limited liability company pursuant to section four hundred seventeen  of
this chapter.
  S  3.  Subdivisions  (g),  (h)  and  (i) of section 204 of the limited
liability company law, subdivision (i) as added by chapter  316  of  the
laws  of 2005, are amended and a new subdivision (j) is added to read as
follows:
  (g) shall not, unless the approval of the state department  of  social
services  is attached to the articles of organization or application for
authority, contain the word  "blind"  or  "handicapped."  Such  approval
shall  be  granted  by the state department of social services if in its
opinion the word "blind" or "handicapped" as used in the limited liabil-
ity company's proposed name will not tend  to  mislead  or  confuse  the
public  into  believing  that the limited liability company is organized
for charitable or nonprofit purposes related to the blind or  the  hand-
icapped; [and]
  (h) shall not, unless the approval of the attorney general is attached
to  the  articles  of organization or application for authority, contain
the word "exchange" or any  abbreviation  or  derivative  thereof.  Such
approval  shall  not be granted by the attorney general if in his or her
opinion the use of the word "exchange" in the limited  liability  compa-
ny's proposed name would falsely imply that the limited liability compa-
ny conducts its business at a place where trade is carried on in securi-
ties or commodities by brokers, dealers or merchants[.];
  (i)  shall  not  contain  the  following terms: "school," "education,"
"elementary,"    "secondary,"     "kindergarten,"     "prekindergarten,"
"preschool,"   "nursery   school,"  "museum,"  "history,"  "historical,"
"historical society," "arboretum," "library," "college," "university" or
other term restricted by section two hundred twenty-four of  the  educa-
tion  law; "conservatory," "academy," or "institute" or any abbreviation
or derivative of such terms, shall  have  endorsed  thereon  or  annexed
thereto the consent of the commissioner of education[.]; AND
  (J)  SHALL,  IN  THE  CASE  OF A LOW-PROFIT LIMITED LIABILITY COMPANY,
CONTAIN THE WORDS "LOW-PROFIT LIMITED LIABILITY COMPANY" OR THE ABBREVI-
ATIONS "L3C" OR "L3C", WITH OR WITHOUT PERIODS OR OTHER PUNCTUATION.
  S 4. Paragraphs 8 and 9 of subdivision  (d)  of  section  211  of  the
limited liability company law are amended to read as follows:
  (8) the discovery of a materially false or inaccurate statement in the
articles of organization; [and]
  (9) IF THE LIMITED LIABILITY COMPANY IS A LOW-PROFIT LIMITED LIABILITY
COMPANY, ITS FAILURE TO MEET ANY OF THE REQUIREMENTS SET OUT IN SUBDIVI-
SION (II) OF SECTION ONE HUNDRED TWO OF THIS ARTICLE; OR

S. 5097                             3

  (10)  the  decision  to  change any other statement in the articles of
organization.
  S  5.  Paragraph  5  of  subdivision (a) of section 701 of the limited
liability company law, as amended by chapter 420 of the laws of 1999, is
amended and a new paragraph 6 is added to read as follows:
  (5) the entry of a decree of judicial dissolution under section  seven
hundred two of this article[.]; OR
  (6) IF THE LIMITED LIABILITY COMPANY IS A LOW-PROFIT LIMITED LIABILITY
COMPANY  THAT  HAS  CEASED  TO  MEET  ANY OF THE REQUIREMENTS SET OUT IN
SUBDIVISION (II) OF SECTION ONE HUNDRED TWO  OF  THIS  CHAPTER  AND  HAS
FAILED  FOR NINETY DAYS AFTER CEASING TO MEET THOSE REQUIREMENTS TO FILE
ARTICLES OF AMENDMENT WITH THE DEPARTMENT OF STATE AMENDING ITS NAME  TO
CONFORM  WITH THE REQUIREMENTS OF SECTION TWO HUNDRED FOUR OF THIS CHAP-
TER GOVERNING LIMITED LIABILITY COMPANY NAMES.
  S 6. This act shall take effect immediately.

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