FOSE for Change

        When I first started out in practice, I was asked to compose a paper on behalf of the State Bar of California on whether contributions to wholly-owned single member LLCs are deductible under the check the box regulations. It appears that single member LLCs are once again in the forefront of the nonprofit sector. Social enterprises wholly-owned by family foundations, i.e., family owned social enterprises (“FOSEs”), are used in the business sector, and they have the potential to be used in the social sector. Mike Miesen’s article on this topic raises an interesting perspective:

“Owning a social enterprise (or creating a disregarded entity) allows a foundation to  efficiently effect change using market mechanisms to sell a good or service, while using philanthropic resources to address market failures and advocate a cause. Critically, it is also a tax-free investment vehicle for the foundation, fulfills the foundation’s requirement to spend  5 percent of its endowment annually, and because [single member limited liability corporations] SMLLCs are autonomous legal entities, protects the foundation’s assets from any liability to which their investees expose them. We think this model could provide a more efficient option that conventional grant- and donation-based models.”

Khrista Johnson