American Bar Association: L3Cs: Useless Gadgets?
When I was a kid, I had a knife with many tools, and I used it frequently and for all kinds of tasks. It had a large blade, a small blade, several screwdrivers, tweezers, a can opener, a bottle opener, scissors, and other devices. It also had something that was marketed as a fishhook remover and fish scaler. I took it fishing, and even tried the hook remover and scaler—they were pretty much useless. I think of such a knife as very useful, adaptable for many purposes, with a few useless gadgets tossed in so that it can be promoted as a tool that does nearly everything one can want.
Limited liability companies are the multipurpose knives of the business organization world. They can be used well for many different tasks. It is this multiplicity of uses, all within one statutory form, that gives LLCs their value and their allure.
One trick with LLCs is to keep from burdening them with useless gadgets. Inclusion of such gadgets is dangerous since some people will attempt to use them, creating risk that should not be created. The well-advised will just use the good tools, and stay away from the gadgets. When my combination hook remover/fish scaler did not work, I folded it back into the knife's body and used a regular scaler. If an LLC gadget does not work, there will be costs incurred by those who attempt to use it to solve a real problem.
Low-profit limited liability companies (L3Cs), adopted in six states with numerous other states considering adoption, are, in the author's view, dangerous gadgets. They add nothing to the LLC package, and might give the unsuspecting user the unfounded belief that difficult tax problems have been solved. Before discussing the risk posed, this article will discuss concepts underlying L3Cs generally. Click here for the full article
Limited liability companies are the multipurpose knives of the business organization world. They can be used well for many different tasks. It is this multiplicity of uses, all within one statutory form, that gives LLCs their value and their allure.
One trick with LLCs is to keep from burdening them with useless gadgets. Inclusion of such gadgets is dangerous since some people will attempt to use them, creating risk that should not be created. The well-advised will just use the good tools, and stay away from the gadgets. When my combination hook remover/fish scaler did not work, I folded it back into the knife's body and used a regular scaler. If an LLC gadget does not work, there will be costs incurred by those who attempt to use it to solve a real problem.
Low-profit limited liability companies (L3Cs), adopted in six states with numerous other states considering adoption, are, in the author's view, dangerous gadgets. They add nothing to the LLC package, and might give the unsuspecting user the unfounded belief that difficult tax problems have been solved. Before discussing the risk posed, this article will discuss concepts underlying L3Cs generally. Click here for the full article
