Facebook CEO Sets Up an LLC for Charity Purposes
Its remarkable for many people to think that quite a few of today’s tycoons have pledged to divest themselves of most of their wealth before they die. The net result is a CEO or innovator that has spent decades to create something for the public good without keeping most of the benefits for their descendants.
When Mark Zuckerberg and Dr. Priscilla Chan decided to make that type of pledge, it therefore wasn’t surprising that they used an LLC structure to prepare to disburse most of their wealth.
What is an LLC?
Limited liability companies exist in almost every state and territory and bridge the gap between a proprietorship and a corporation. They offer many of the benefits of a corporation from a liability standpoint in that the owners can keep their own wealth away from litigation. At the same time, foundations tend to be much stricter about how the actual wealth is handled and who may do what in order to get something accomplished. From this point of view, if the Zuckerberg family is interested in focusing on philanthropy and giving money away, they will encounter far fewer rules by using an LLC.
Are fewer rules the reason an LLC was set up?
Structure-wise, any time you have a more casual atmosphere with fewer regulations and talented individuals working closely together to make something happen, it should make it easier for operations to succeed. Many analysts have also pointed out that being able to make quick changes to roll with trends and external conditions are something that favor using an LLC. It is anticipated that with a potential 60 or 70 years of giving ahead of them, Mr. Zuckerberg and Dr. Chan, an LLC will provide them with not only the flexibility that they need, but access to a broader range of investments in different areas that can impact the world positively.
From a business or tax standpoint, how does an LLC compare to a charitable foundation?
An LLC allows its owners the leeway to add and subtract capital when necessary without a lot of checks and balances beyond straight accounting. Charitable foundations are more rigid and normally require a board vote to disburse funds- as well as a set of rules that cover their own behavior and personnel choices.
They also typically have more steadfast rules for an organization that is seeking funds. If a charity is giving to cancer research organizations and is set up for that purpose, the rules will be fairly standard and can only be changed by the board. With an LLC, the Zuckerbergs can make changes on the fly and draft an organization specific set of guidelines for each charity or research organization that they give money to, a definite advantage.
On the tax side of things, the largest difference internally for an LLC is that the money is not going to be treated as anything other than the Zuckerberg’s personal funds until the money is actually given away. There has been some discussion that this can be used to offset current tax liabilities for the couple and some of that may be true, however, the primary advantage continues to appear to be the ability to have the LLC turn on a dime in order to meet their goals. The two have already announced that they will give away $1 billion dollars a year for the next three years, a large commitment that will likely be followed by a smaller, but more regular payout that will not affect the LLC structure at all.If you need LLC help, contact us today at 512-457-1177.