Zuckerberg denies that his new organization is a tax dodge
LLCs don't get big tax benefits.
Mark Zuckerberg is well aware that a lot of people think he's giving away $45 billion worth of Facebook shares to dodge taxes. That's why he's taken to Facebook yet again to clarify that the Chan-Zuckerberg Initiative is a limited liability company (LLC) and not a traditional charitable organization. The difference? By setting up an LLC, Mark and Dr. Chan won't be able to take advantage of tax deductions and can only get tax breaks if they donate money to charities. As Zuckerberg seems to imply in his post, if he really wanted a way to dodge taxes, he'd have set up a traditional foundation instead.
That said, LLCs do get some tax and legal benefits. According To The New York Times, the couple's personal assets will not be taken into account in case the LLC gets sued, and they'll be taxed as individuals if the initiative sees profits. More importantly, the couple will have more control over an LLC: they don't have to spend five percent of the initiative's value every year as is required for charitable foundations, they can use the money to support politicians or particular policies, they can invest in promising startups, donate to non-profits and there are no restrictions over joining forces with other entities. For now, though, the couple plans to focus on "personalized learning, curing disease, connecting people and building strong communities."
Here's part of the Facebook founder's post:
The Chan Zuckerberg Initiative is structured as an LLC rather than a traditional foundation. This enables us to pursue our mission by funding non-profit organizations, making private investments and participating in policy debates -- in each case with the goal of generating a positive impact in areas of great need. Any net profits from investments will also be used to advance this mission.
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. And just like everyone else, we will pay capital gains taxes when our shares are sold by the LLC.