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Start-up Guide

Part 3 Finding a Third Way

Finding a Third Way

While the for-profit versus nonprofit choice has long defined the conversation around business options in the United States, there have been moves to create alternatives. These models strive to strike a balance between making a profit and benefiting the public – or take advantage of the best of both worlds. These third way arrangements include models like worker-owned cooperatives, low-profit limited liability companies, benefit corporations, and nonprofit/commercial partnerships.

  • Nonprofit/Commercial Partnership: This would involve setting up two organizations with different tax statuses. The organizations would serve as partners and work together to meet different but aligned missions while taking advantage of different benefits and subsidies. In a partner-subsidiary relationship, the nonprofit has to be run independently of the for-profit and must operate primarily in the service of its charitable mission. An example of what this might look like is a nonprofit investigative journalism organization partnering with a for-profit publishing company.
  • Cooperative: There are 5 kinds of cooperatives to choose from. Cooperatives are operated by democratic principles and are generally committed to the communities they operate in. Bristol Cable in the U.K. and Haverhill Matters, a project of the Banyan Project, are examples of this model. The Devil Strip in Akron, Ohio, is also pursuing a cooperative model.
  • Benefit corporation: Benefit corporations are a mutation of the traditional corporation that provides a double bottom line: one focused on profit and the other on creating social benefit. It’s important to note that benefit corporation legislation has not been adopted by all 50 states. This is not to be confused with B Corp certification, which is a third party standard that companies can measure themselves against. B Corp certification is similar to the Good Housekeeping Seal or Fair Trade Certification. Companies are not required to be incorporated as a benefit corporation to become B Corp certified. In addition to offering a DPO, Berkeleyside was a benefit corporation (as of 2019 they converted to nonprofit).
  • Low-Profit Limited Liability Company (L3C): Like the benefit corporation, L3Cs are based on a for-profit counterpart. Legislation establishing the L3C has only been passed in a handful of states, and we have been unable to find examples of journalism organizations utilizing this business model.
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