July 9, 2010; Source: The Dispatch | Another state has passed legislation that would authorize low profit limited liability corporations (L3Cs). Pitched as an effort to “promote domestic manufacturing” in the state, the bill (Endangered Manufacturing and Jobs Act) is expected to be signed by North Carolina governor Bev Perdue.
The domestic manufacturing in question is the state’s struggling furniture and textile industries, long seen as losing out to global competition. One of the sponsors of the bill, Republican state senator Stan Bingham, made clear what the L3C concept would do: “It allows big foundations, like Z. Smith Reynolds, to give low-interest loans to entrepreneurs.”
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The primary sponsor of the bill, Republican state senator Jim Jacumin, is a former CEO of a corporation that made machinery for furniture and textile manufacturers, and ran for state office with the intention of doing something to help preserve domestic production. He imagines that foundation loans to L3Cs would be at 2 percent or 3 percent compared to bank loans at 10 percent to 12 percent.
What criteria would an L3C have to meet to be eligible for foundation support? Jacumin says, “it has to serve a community interest, such as providing jobs in an area of high unemployment.” Jacumin is high on the concept, citing a furniture industry supplier who would relocate his company from another state to North Carolina and close his overseas divisions.
He also says, in the words of the Dispatch, that “similar legislation has proven to create jobs in other states, including Michigan, Vermont, Maine, Illinois, Wyoming and Utah.” Are Jacumin’s high hopes realistic or wishful thinking? The summer issue of the Nonprofit Quarterly features a unique article by Daniel S. Kleinberger, a professor of law at William Mitchell College of Law, exploring the pros and cons of L3Cs. Look for it.—Rick Cohen