WEB DESK: Earlier this week, Mark Zuckerberg made the announcement that he, along with his wife Priscilla Chan, would be donating 99 percent of their Facebook shares — worth around $45 billion — to the causes of “advancing human potential” and “promoting equality.”
This announcement caused a stir among the Facebook community. Some accused their decision as a scheme to avoid taxation as they intend to give their money to a legal structure of a limited liability company (Chan Zuckerberg Initiative) rather than a nonprofit organization.
Critics suggest that Zuckerberg will benefit through the charity, and be able to expand his personal wealth through the initiative.
Zuckerberg came out clear on the taxation front through a Facebook post. “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,” wrote Zuckerberg.
By using the limited liability company status Zuckerberg can invest in other companies and lobby for legislation, something a non-profit can not do.
A spokeswoman for the family said that any profits from the investments would be plowed back into the Chan Zuckerberg Initiative for future projects, the New York Times reported.
The Limited Liability Company structure allows a corporate structure whereby the members of the company cannot be held personally liable for the company’s debts or liabilities. Limited liability companies (LLC) differs slightly from one country to the next. However, it is essentially a hybrid entity that combines the characteristics of a corporation and a partnership or sole proprietorship.
Zuckerberg used his most recent post to call out initial areas of focus for the Initiative; choosing “personalized learning, curing disease, connecting people, and building strong communities” as places it will first spend its money.
“Our education work has been funded through a non-profit organization, Startup:Education, the recently announced Breakthrough Energy Coalition will make private investments in clean energy, and we also fund public government efforts, like the CDC Ebola response and San Francisco General Hospital,” added Zuckerberg.