Startups may like the L3C path to find their way.

By KAREL SOVAK

Social entrepreneurship has picked up steam over the past few years based on the number of conferences, workshops and the rise of L3Cs, or low profit limited liability corporations.

Social entrepreneurship finds its place in our capitalistic society at a crucial time. With the advent of the corporate financial collapse, demonstrations like Occupy Wall Street and even the issues overseas with the European Union, there may never be a better time for entrepreneurs to focus on solving some social issues. Social entrepreneur looking to impact the triple bottom line focus on three things — people, planet and profit.

Since the L3C concept is new to the scene, many state legislatures have looked into their organizational structure as a viable business model to assist the social entrepreneur. Currently, eight states have approved the L3C as a legal business structure. Ten more states are looking to introduce the legislation in 2012. The legislation requires an amendment to the general limited liability act. This opens the door for those entrepreneurs who wish to solve the issues of poverty, hunger, homelessness or literacy (and the list goes on) to create a business model that acts like both a non-profit and for-profit. In fact, some social entrepreneurs have chosen to help in the sustainability of non-profits or the social responsibility of for profits.

In addition to the government side of business, the number of post-secondary institutions offering courses in social entrepreneurship has risen more than 400 percent in the last decade. The Opus College of Business at the University of St. Thomas, St. Paul, Minn., is included on that list of schools looking to encourage social entrepreneurs in their MBA program of study. Additionally, many community economic development organizations are promoting and offering incentives to those choosing the L3C path, especially in youth initiatives.

There are many routes the social entrepreneur can take. Combating obesity, finding alternative energy sources, even taking on floral shops are current businesses finding success in the United States. Absent legislation from the state of North Dakota to create the L3C model, there are still many reasons for social entrepreneurs to look within our borders to hone their skills in a social manner.

Due to the oil activity in the western part of the state, North Dakota is trending to be on the verge of many organizations to fulfill the myriad social needs in many communities. While some of the for profit companies are doing a satisfactory job providing for housing and other infrastructural needs, social services needs will continue to be on the rise. Currently, one of the areas of greatest needs is the emergency medical services. This industry has seen a large attrition of vital talent taking new positions in the oil industry at much higher wages. Many volunteers are also scarce, which calls for a demand to find more innovative solutions to meet the many needs. Perhaps North Dakota legislators can see their way to consider adopting the L3C as a solution?

Return on investment (ROI) now has a new player in the market. For non-profits, the ROI has always been based on the number of recipients served, or the attempted fulfillment of their mission. The for-profit corporations’ ROI is a performance metric used to measure the gain of an investment based on the cost of the investment. For the L3C, the ROI seeks to blend the risk and return of any profits to promote the benefits of social goals.

While L3Cs may not be the pot of gold at the end of the rainbow, they could provide a much needed relief with the many storm clouds brewing over so many societal issues.

Karel Sovak is a professor in the Gary Tharaldson School of Business at the University of Mary. He is also the facilitator for the juniors and seniors in their Emerging Leaders Academy. He can be reached at 701-355-8042, or ksovak(at)umary.edu.