Hello, everyone.
Have you heard about the new “low-profit limited liability company?” This new form of organization, enacted in Vermont, blends elements of for-profit and nonprofit corporations.
Ben and Jerry’s
The plight of Ben and Jerry’s Ice Cream is an example of why this is needed. When a small business gets to the point where additional investors are needed for expansion, one way of raising capital is to become a public corporation. However, once a public corporation, the key goal of the business becomes maximizing shareholder value. In other words, anything that can be done to increase the value of the stock, must be done.
When a European corporation, Unilever, stepped in with an unsolicited bid to buy Ben and Jerry’s for far more than the current value of their stock, the Board was forced to sell or face a potential lawsuit from the shareholders.
This case highlighted several issues. Ben and Jerry’s, as well as many other small businesses, had a philanthropic purpose as well as a financial purpose. However, once a business takes on outside capital, the shareholders can decide whether or not the philanthropic goals can be pursued. Yes, Unilever agreed to continue to give 7.5% of Ben and Jerry’s profits and to fund the Ben and Jerry Foundation with an upfront $5MM as part of the deal. But what happened to the other social principles, like BHT-free milk and fair trade practices with Mexican and Brazilian farmers?
Vermont steps in
Vermont, the home state of Ben and Jerry’s, recognized the need for a form of organization that would meet the current social enterprise trend in the business world: philanthro-capitalism, venture philanthropy, green technology, and fair-trade practices, to name a few examples of this trend. This hybrid model, the L3C, applies to companies formed for charitable or educational purposes, but it can generate profits for the owners as long as those profits are not “a significant purpose” of the company.
However, there is no sanction against profits, even significant profits. And since it is based on the Limited Liability Company model rather than corporate law, there are no stringent laws pertaining to the buy/sell decisions of the owners.
It remains to be seen how this initial statute will morph as other states take it up and as the public begins to use it. There is also the issue of the IRS and how they will regard the entity. But I think it is an interesting example of the times:
- With Pluto in Capricorn, traditional forms of business that no longer serve are breaking down, and new forms are emerging.
- With Neptune in Aquarius, the rights of people to transact business as they wish without interference from government or shareholders, has gained strength. Connections between for-profit and not-for-profit organizations are being formed and distinctions between the entities are blurring and merging. And entrepreneurs are recognizing more and more their individual responsibility to the whole.
- With Uranus in Pisces, we see innovation to overcome the mature stage in the business life cycle where shareholders and the public have more power than the original owners. We see a movement toward collaboration with other forms of business, such as foundations and non-profit entities.
- With Saturn in Libra, we see the support of the law to implement structures of partnership, fairness, and balance. Saturn in Libra bridges two independent entities, making a stronger prototype through a hybrid entity.
A step in the right direction, I’d say. What do you think?
For further reading on this subject, check out the Neptune in Aquarius, Saturn in Libra, and Uranus in Pisces categories at the right. Here are some other related posts:
Business life cycle – mature stage
The Globalization of Ben and Jerry’s
Don’t forget. If you have an astrology-related business question (or a business-related astrology question) send it to me at ellen@astro4business.com. I’ll answer it in these posts, anonymously of course, and we can all learn from each other’s experiences. I look forward to it! Have a question now? Email it and let’s get started!