AB 902

Current law authorizes the creation of limited liability companies (LLCs) for

any lawful purpose. This bill authorizes the creation of low-profit LLCs (L3Cs), a

type of LLC.

Under the bill, a L3C must be organized for a business purpose that satisfies,

and is at all times operated to satisfy, all of the following requirements: 1) the L3C

significantly furthers the accomplishment of a religious, charitable, scientific,

literary, or education purpose as defined under federal tax law, and would not have

been formed but for the entity's relationship to the accomplishment of the religious,

charitable, scientific, literary, or education purpose; 2) no significant purpose of the

L3C is the production of income or the appreciation of property; and 3) no purpose

of the L3C is the accomplishment of a significant political or legislative purpose, as

defined under federal tax law. If a L3C at any time ceases to satisfy these

requirements, it ceases to be a L3C, but continues to exist as a LLC.

The bill authorizes the Department of Financial Institutions to bring

administrative dissolution proceedings against a L3C if the company has ceased to

meet any of the requirements above and has failed to amend its name to reflect it is

no longer a L3C within 60 days after ceasing to meet any of the requirements.