Business owners can be some of the most philanthropic people on the planet. No one makes more charitable donations than business owners. The IRS estimates business owners give to five or more charities, which translates to them being about 10 times more generous than that of the general population. In fact, 83% of high net worth business owners actually plan to increase their giving in the next three years as well.
As a business owner, I myself, want to give all I can in order to run my company more efficiently, minimize my business’ taxes, and most of all just to show there is still some good in the world. When it comes to options for small business donations to charity, there are many avenues you can take to do so. Let’s look at a few of the ways you can give back to those you believe need it the most.
Giving money in the form of cash is still extremely popular. But “cash” can actually come in various forms. For instance, one owner may choose to set up a grant. Another might choose to give back with scholarships for a particular need. You can even give cash back through a stock-ownership plan.
Here’s an example of a stock-ownership plan. Let’s say back in the day you bought Apple. We know that Apple is now trading around $194 (as of June, 2019). So if I didn’t need that money and I had other assets to pull from to cover myself, I could give the stock away. That saves me from paying taxes on the capital gains I may have on the sale of the stock, and now the charity can use the full proceeds.
Business owners will often donate physical products in the quest to be more philanthropic. There are fast food restaurants in our town that take their leftover food to local shelters. I’ve heard of food companies, some that are even nationally known, donating their surplus produce twice a week. Once the food no longer meets that store’s standards, they gift it to food banks or pantries that feed those in need. So when thinking about donation options, don’t limit yourself to simply writing a check.
I offer complementary professional advice to several 501(c)3’s that need it. There are several other business owners that I know doing the same things. Many times, business owners may sit on a board free of charge just to offer help to the community. As a whole, they are truly philanthropic.
Many times owners give away a non-liquid asset. That could end up being a blessing for the company. Perhaps it’s a piece of real estate. I actually had a client of mine give away their mineral rights. The client was in the coal mining industry and decided to give his mineral rights to an orphanage overseas.
Some owners choose to donate life insurance policies. It’s not uncommon for people to give away accounts sometimes, leaving them to charities to maintain and control. There are just so many ways to utilize giving back with cash.
One of the most unusual ways to grant money to your favorite charity is called a Donor Advised Fund (DAF). These are excellent for creating a legacy. A legacy is a way to give money away for something in return. As a CERTIFIED FINANCIAL PLANNER™ I can see evidence of the Legacy effect all around. For example, we have several colleges here in Knoxville, and you see buildings named after people all the time. That’s similar to what a DAF offers. It’s just a way for the donor to be recognized for giving money to the charity. Basically, a business owner gives money, in some form or fashion, to intermediaries. When it is set up this way, your financial advisor can help you to know the best route to possibly take. An example of that would be the business owner giving money to a church or some other group.
On some occasions, the donor works with their favorite CFP®. Their financial advisor manages the assets for the intermediary. In doing so they ensure the income from those assets goes directly to the charity every year. It gets even more fun if the owner can get his family involved. He will work with that intermediary to make sure the family members are carrying out their wishes.
One client I had of mine sold his business and donated a million dollars to a religious organization in which his life has been completely centered around. The particulars of the case were that the client was concerned the church would waste his money, so a DAF was used. A Donor-Advised Fund enables you to name the organization as a benefactor, and then settle the situation.
So no matter how you want to give, the point is to just give. If you’re a business owner wanting to make small business donations to charity but need help deciding which option makes the most financial sense, by all means, contact us.