S T A T E O F N E W Y O R K
________________________________________________________________________
6726
I N S E N A T E
February 1, 2010
___________
Introduced by Sens. STACHOWSKI, PARKER -- read twice and ordered print-
ed, 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 estab-
lishing the L3C act regarding 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. This act may be known and shall be cited as the "L3C act".
S 2. Section 102 of the limited liability company law is amended by
adding a new subdivision (n-1) to read as follows:
(N-1) "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)).
S 3. Paragraph 7 of subdivision (e) of section 203 of the limited
liability company law is renumbered paragraph 8 and a new paragraph 7 is
added to read as follows:
EXPLANATION--Matter in ITALICS (underscored) is new; matter in brackets
[ ] is old law to be omitted.
S LBD15171-02-0
S. 6726 2
(7) IF THE COMPANY IS A LOW-PROFIT LIMITED LIABILITY COMPANY, AS
DEFINED IN SUBDIVISION (N-1) OF SECTION ONE HUNDRED TWO OF THIS CHAPTER,
THAT THE COMPANY IS A LIMITED LIABILITY COMPANY.
S 4. 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 three new subdivisions (j), (k) and (l)
are added to read as follows:
(g) shall not, unless the approval of the state department of social
services OR ITS SUCCESSORS IN FUNCTION 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 OR ITS SUCCESSORS IN FUNCTION if in its opinion the word
"blind" or "handicapped" as used in the limited liability 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 handicapped; [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[.];
(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;
(K) SHALL NOT, IN THE CASE OF A LOW-PROFIT LIMITED LIABILITY COMPANY
UNLESS THE APPROVAL OF THE STATE DEPARTMENT OF SOCIAL SERVICES OR ITS
SUCCESSORS IN FUNCTION 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 OR ITS SUCCESSORS IN FUNCTION IF IN ITS OPINION THE WORD
"BLIND" OR "HANDICAPPED" AS USED IN THE LIMITED LIABILITY 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 HANDICAPPED; AND
(L) SHALL NOT, IN THE CASE OF A LOW-PROFIT LIMITED LIABILITY COMPANY
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 COMPANY'S
PROPOSED NAME WOULD FALSELY IMPLY THAT THE LIMITED LIABILITY COMPANY
CONDUCTS ITS BUSINESS AT A PLACE WHERE TRADE IS CARRIED ON IN SECURITIES
OR COMMODITIES BY BROKERS, DEALERS OR MERCHANTS.
S. 6726 3
S 5. Paragraphs 8 and 9 of subdivision (d) of section 211 of the
limited liability company law are renumbered paragraphs 9 and 10 and a
new paragraph 8 is added to read as follows:
(8) 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 (N-1) OF SECTION ONE HUNDRED TWO OF THIS CHAPTER.
S 6. Paragraph 5 of subdivision (a) of section 701 of the limited
liability company law is renumbered paragraph 6 and a new paragraph 5 is
added to read as follows:
(5) 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 (N-1) 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 7. This act shall take effect immediately.