An LLC? It Gives Facebook Founder More Freedom To Meet Philanthropic Goals

Dec 3, 2015
Originally published on December 3, 2015 2:46 pm

Facebook founder Mark Zuckerberg and his wife Priscilla Chan's recently announced $45 billion philanthropic pledge will be given away not through a nonprofit foundation but instead through a for-profit company the couple is creating.

They've donated to health care and education in the past, but this time it appears they'll be giving away billions of dollars through a limited liability company, known as a LLC. The for-profit company is called the Chan Zuckerberg Initiative.

"He's giving himself a huge amount of freedom. He and his wife are a very young couple, and they're giving themselves the freedom to decide what will be the most effective way of dealing with the social issues they care about," says Paul Brest, a professor at Stanford and former president of the William and Flora Hewlett Foundation.

Brest says one big difference between a nonprofit and a private company is politics.

"A foundation itself is not allowed to do what the Internal Revenue Code defines as lobbying," he says. "If you're trying to achieve a social end through advocacy, you're going to find yourself very constrained, whereas if you're just paying it out of your own pocket if you're a company or an LLC, there are really no constraints at all, at least imposed by the tax code."

In a public letter to their newborn daughter, Chan and Zuckerberg said about their philanthropic goals, "We must participate in policy and advocacy to shape debates."

Mollie Cullinane, who runs a law firm that specializes in philanthropic giving, says creating an LLC instead of a nonprofit looks like a move by Chan and Zuckerberg "to get more deeply involved in advocacy and promotion of certain causes that other charities and foundations can't speak out about as loudly."

Zuckerberg doesn't fit into an easy political definition. He and Chan support clean energy and solving climate change and have taken a more liberal stance on immigration reform. At the same time, Zuckerberg has donated money to both Democrats and Republicans, including Marco Rubio.

But beyond politics, there are other ways an LLC will give the couple philanthropic flexibility.

"There's a whole new area opening up, so-called impact investing, where you invest in a for-profit organization that has a social mission," Brest says.

So the couple might invest in clean energy companies, for example, and could make money off those investments. Foundations can do some of that. But, Brest says, "you are freer from any restrictions if you simply do it through a private company."

Both Brest and Cullinane say they're excited to see what kind of innovative ways the couple puts their money to work.

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LINDA WERTHEIMER, HOST:

Some people pass around cigars to celebrate the birth of a new baby. This week, Mark Zuckerberg and his wife, Priscilla Chan, did something a bit more impressive. But their $45 billion philanthropic pledge actually will not be parked inside a nonprofit foundation. Instead, the couple is creating a for-profit company to give away the money. NPR's Chris Arnold reports.

CHRIS ARNOLD, BYLINE: Zuckerberg and Chan hinted at the types of causes they might support in a video that they posted on Facebook.

(SOUNDBITE OF ARCHIVED RECORDING)

MARK ZUCKERBERG: You know, what does it take to make it so people don't get sick anymore? Could we build more inclusive and welcoming communities?

ARNOLD: They have donated to health care and education in the past. But this time, it appears that they'll be giving away billions of dollars through a for-profit company - an LLC.

PAUL BREST: He's giving himself a huge amount of freedom. He and his wife are a very young couple. And they're giving themselves the freedom to decide what will be the most effective way of dealing with the social issues they care about.

ARNOLD: Paul Brest is a professor at Stanford and the former president of the William and Flora Hewlett Foundation. He says one big difference between a nonprofit and a private company? Politics.

BREST: A foundation itself is not allowed to do what the Internal Revenue Code defines as lobbying. If you're trying to achieve a social end through advocacy, you're going to find yourself very constrained, whereas if you're just paying it out of your own pocket - if you're a company or an LLC - there are really no constraints at all, at least imposed by the tax code.

ARNOLD: In a public letter to his newborn daughter, Zuckerberg said about his philanthropic goals, quote, "We must participate in policy and advocacy to shape debates." Mollie Cullinane runs a law firm that specializes in philanthropic giving. She thinks that creating an LLC instead of a nonprofit looks like a move by Chan and Zuckerberg -

MOLLIE CULLINANE: To get more deeply involved in advocacy and promotion of certain causes that other charities and foundations can't speak out about as loudly.

ARNOLD: Zuckerberg himself doesn't fit into an easy political definition. He and Chan support clean energy and solving climate change, and have taken a more liberal stance on immigration reform. At the same time, Zuckerberg's donated money to both Democrats and Republicans, including Marco Rubio. But beyond politics, there are other ways that an LLC or a private company will give the couple philanthropic flexibility. Paul Brest.

BREST: There's a whole new area opening up, so-called impact investing, where you invest in a for-profit organization that has a social mission.

ARNOLD: So the couple might invest in clean energy companies, for example, and could make money off of those investments. Foundations can do some of that, but -

BREST: You are freer from any restrictions if you simply do it through a private company.

ARNOLD: Both Brest and Cullinane say they're excited to see what kinds of innovative ways that the couple puts their money to work. Chris Arnold, NPR News. Transcript provided by NPR, Copyright NPR.