In his book The Revolutionary Stage, Joseph Zeigler states that Arena Stage in Washington, DC, began as a for-profit corporation by selling shares totaling $15,000 (at seven percent interest) to 300 Washingtonians. As part of doing research related to my dissertation topic—the impact of economic forces on the American resident theater movement—I recently read a speech called “The Long Revolution” written in 1978 by Zelda Fichandler, founder of Arena Stage.
She writes that she founded the theater in 1950 as a regular profit corporation, in order to better maintain control of its artistic policy, and that the theater became a nonprofit seven years later “in order to become eligible for gifts and grants, especially from the Ford Foundation which entered the field that year.”
Ms. Fichandler elaborated on the transition to becoming a nonprofit, saying:
“[…] we made all of our expenses at the box office for roughly the first fifteen years of our existence. It was as late as the mid-sixties when we conceded that we couldn’t continue to do this, but had to become a deficit-producing organization.
I bring this up simply to point out that, while we are gathered here in the name of the nonprofit corporation (and, indeed, without the nonprofit income tax code, our American theater would simply not exist), being nonprofit does not really define us—our goals, our aims, our aesthetic, our achievements. What defines us, measures us, is our capacity to produce art.”
I’ve been wondering lately what the resident theater movement would look like today if, in the mid-twentieth century, theaters had the option of becoming limited liability low-profit corporations (L3C) instead of nonprofits. Would L3C have been a better fit with their goals, aims, aesthetic, and achievements?
What about community theaters today? What about the collectives of artists that simply desire to form and disband in different configurations over time and work together on a project-by-project basis? What about single choreographer dance companies, many of which, in spirit, seem more like sole proprietorships than nonprofits? Or ensemble theaters? What about the boutique for-profit record label struggling to maintain a commitment to producing opera recordings? Or the performing arts center created to spur cultural and economic development in a depressed market?
“Socially beneficial for-profit venture” rings truer to me than “commercial” or “nonprofit” when I think about these types of enterprises. How many organizations became nonprofit only to become eligible for gifts and grants? How many, if they might have received investments and grants but maintained partial or total ownership of their entities, might have taken the L3C route? How many feel burdened by the idea of trying to become a “permanent nonprofit institution” and would like to think about closing up shop when the raison d’être has left the building? How many arts organizations struggle to reconcile what they do with the exempt purposes outlined under Internal Revenue Service Section Code 501(c)(3)?
I’m by no means suggesting that all or even most cultural institutions should become L3Cs: nonprofit or commercial may very well be a better fit for most and L3C legislation is not yet adopted in most states. We perhaps need to test the viability of the L3C model in a variety of circumstances over the next several years to know whether it holds real promise for the cultural sector. But this much I know: in order for the L3C model to work there will need to be both cultural entrepreneurs and those (private and public funders) willing to put in the risk capital.
Ford’s influence in 1957 is clear from Zelda Fichandler’s remarks. The powerful signal—to be eligible for a grant you must be a 501(c)(3) nonprofit corporation—continues to be transmitted across the land by the majority of those that fund the arts. I’m confident we have cultural entrepreneurs; but do we have those willing to embrace this new model and invest in them? I hope so; because it’s going to take two daring souls to do this dance.