While Mark Zuckerberg’s recent philanthropic initiative does sound like a noble cause, though there’s a small catch to it. As we are all aware, in the recent Chan Zuckerberg initiative the couple plans to donate 99 percent of their shares in Facebook over their lifetime “to improve the lives of all those coming into this world”.
However, rather than a simple non-profit organization, the initiative is a Limited Liability Company (LLC) which acts somewhat like any business organization. Hence, it gives Zuckerberg more administrative control though at the same time will be deprived of any tax benefits. Essentially, opting for the LLC structure gives Zuckerberg and wife Priscilla to make other private investments, thereby giving more control over their finances.
“By using an LLC instead of a traditional foundation, we receive no tax benefit from transferring our shares to the Chan Zuckerberg Initiative, but we gain flexibility to execute our mission more effectively. In fact, if we transferred our shares to a traditional foundation, then we would have received an immediate tax benefit, but by using an LLC we do not”, said Zuckererg in a Facebook post on Thursday.
While apart from giving them more flexibility and control, an LLC structure if in any point of time gets sued, the couple’s personal assets won’t be confiscated as they can transfer their private assets into their LLC foundation.
“And just like everyone else, we will pay capital gains taxes when our shares are sold by the LLC,” he added.
To recall, Zuckerberg and his wife Priscilla Chan announced their plans for the new charitable organization after officially becoming parents, announcing the birth of their daughter Max, short for Maxima. According to a securities and exchange filing, Zuckerberg has already committed to give away up to $1 billion of Facebook stock on an yearly basis for the next three years.