Thursday, December 3, 2015
Facebook (not surprisingly) and other social media blew up when Facebook CEO, Mark Zuckerberg, and his wife, Dr. Priscilla Chan, released an open letter to their new baby daughter, Max. (Congratulations to all, by the way.) The Chan Zuckerberg family announced that they would be giving a ton of money to support important causes, which caused people to get excited, get skeptical, and get mad.
One big complaint has been that the family chose a limited liability company (LLC), which is not a corporation (more on that later), rather than a not-for-profit entity to do the work. Some say this makes it a scam. I say hooey. Even if it were a scam, it’s not because they chose an LLC.
- First, without knowing the LLCs members or structure, there’s no reason to say the LLC cannot be a 501(c)(3). But, more important, the Letter to Max never says they will give money to charity. Never.
The letter says:
As you begin the next generation of the Chan Zuckerberg family, we also begin the Chan Zuckerberg Initiative to join people across the world to advance human potential and promote equality for all children in the next generation. Our initial areas of focus will be personalized learning, curing disease, connecting people and building strong communities.
We will give 99% of our Facebook shares -- currently about $45 billion -- during our lives to advance this mission.
How the Chan Zuckerberg’s choose to advance that mission can easily be through an LLC, whether it is tax-exempt or not. They may have chosen the for-profit (or benefit) LLC as the entity so that they could seek profit in certain ways, with the thought that the profit seeking supports the mission. Or maybe they want to be able to give to for-profit entities to build and grow business in areas that further their mission, but lacks status that would satisfy IRS nonprofit requirements.
Regardless, the choice of LLC may be a good one. I am thinking these folks have good counsel and financial advisors, so the entity choice probably serves their purposes, or at least their best estimate of those future purposes. And I am all for them putting that kind of money behind what seems to me like an excellent mission. So, like them or hate, but back off their choice of entity. (Leave the LLC alone!)
And, since this would not be a post of mine without noting the utter media failure in referring to the LLC, again, it’s a limited liability company, not corporation, as several news outlets have reported. PBS tends to be my favorite news source, which makes it all the more painful that they may be the source of this limited liability corporation nonsense.
The apparent source of the limited liability “corporation” nonsense is the PBS Newshour, link here. I know the U.S. Supreme Court has gotten this wrong, too, but I had hope for better from PBS. Oh well. I'll still be listening to PBS for quality news, and I'll still be happy to hear when someone commits to putting billions of dollars behind good causes. If either one doesn't follow through, I'll be disappointed, but I am not ready to give up hope on either one, just yet.