Jay Sachetti joined Jeff O’Brien, partner at Husch Blackwell and Dyanne Ross-Hanson, president of Exit Planning Strategies talked about the market for mergers and acquisitions, exit planning opportunities for companies that don’t end up for sale and how companies can maximize their eventual sale price during an early October panel at the first Upsize on Tap event at Summit Brewing Co. in St. Paul.
When the state Legislature passed a law requiring employers to provide paid leave and safe time for employees, Justin Bieganek started hearing differing details from friends, colleagues and peers.
business builder money
by Carin Thomas
The term “philanthropist” comes from the Greek words for “love” and “humanity.” Such a person is rewarded with a sense of personal satisfaction that comes from giving.
Today, philanthropists can find that incorporating charity into their personal and business financial planning strategies can not only offer personal satisfaction, but also tax advantages.
Business owners and entrepreneurs are generous when it comes to philanthropy. According to a 2002 survey by Minnesota Business Giving, 76 percent of companies with 20 to 99 employees donated cash as part of their corporate philanthropy efforts. On the national level, the Better Business Bureau Wise Giving Alliance cited that 91 percent of small businesses with four to 99 employees in the United States participate in some kind of philanthropy.
These findings show that business owners are looking for ways to give back to their communities. While such altruistic efforts benefit those on the receiving end, with a little thought and some strategic planning, philanthropy can help you meet your financial and business goals too.
Give strategically
Many entrepreneurs use philanthropy to retain capital in their asset base for extended periods to help them meet their income and asset-building strategies. If done strategically, it also can minimize the amount of capital that is lost to transfer taxes.
Philanthropy can take on many forms, anything from volunteering time to an important cause to the formal establishment of a sophisticated charitable giving vehicle. There are several ways that you can use philanthropy to benefit you and your business.
Donate cash contributions to a public charity such as the United Way, a Community Foundation or Red Cross. They’re deductible up to 50 percent of your adjusted gross income (AGI) in a given year.
Make a gift of appreciated property to a public charity such as stock from your company or personal real estate. As long as it has been held for one year or longer, this may be deductible based upon the asset’s fair market value. The deduction is limited to 30 percent of your AGI in a given year for income tax purposes. Gifts of appreciated property that have been held for less than one year are limited to the lesser of the fair market value or the cost basis in the asset and may be used to offset up to 50 percent of your AGI.
For example, if you sell appreciated stock from your company, assuming the stock was worth nothing at the time you started the company and several years later the stock has appreciated to $500,000, you could sell the stock, pay capital gains taxes, and still leave a large amount of money to the charity. Or, you could donate all or a portion of the stock directly to the charity. That stock donated and subsequently sold by the charity would incur no capital gain tax liability.
Create a donor-advised fund, or a charitable fund established at a public charity. Through the fund, donors can make tax-deductible, irrevocable contributions to the charity, often a community foundation, which is managing the program. You retain the right to advise the community foundation to invest the assets according to your charitable goals and the right to recommend grants from the fund to the charities of your choice.
The community foundation would handle the financial and administrative duties as well as ensure the receiving charities are eligible to receive grants. The community foundation files its own annual tax returns, obtains an annual independent audit and sends donors regular financial reports.
You can donate cash, securities, real estate or other appreciated assets to a donor-advised fund, and the gift is immediately tax-deductible in the year it is made — up to 50 percent of AGI for cash and 30 percent for appreciated assets such as publicly traded stock. This enables donors to better manage their tax deduction by gifting to their fund in years when they may have extraordinary taxable events but make grants to the grantee charities whenever they decide.
To encourage employee involvement, you can set up an employee advisory committee to oversee the donor-advised fund and to direct the charitable contributions.
Setting up a private family foundation allows business owners to have complete control over distributions. As an added benefit they can create a personal legacy in their community. Keep in mind gifts to private foundations are limited to 30 percent deduction of AGI for cash and 20 percent deduction for appreciated publicly traded stock.
Donating your time comes with no tax write-offs, but all incurred expenses, such as transportation, mileage, lodging and meals, are tax-deductible. If you and your employees volunteer on a regular basis, keep track of such expenses because they can add up.
Beyond the financial
Beyond the financial benefits of philanthropy, contributing to a charity is a great way to boost employee morale, garner a positive profile of your company in your community and encourage your employees to interact in the neighborhoods in which they reside. It enables a business to demonstrate a long-term commitment to its community, create a culture of giving, and support causes that are important to the company.
Remember, when enhancing your portfolio with philanthropy, you should always consult a team of experts, including a financial adviser, an attorney and others, to ensure the most strategic avenues for pursuing your personal and business goals. When done strategically, philanthropy can be a powerful tool to benefit your portfolio, your business, and most importantly, the receiving charity.
Carin Thomas is a senior financial adviser with Merrill Lynch in Bloomington. She has been helping individuals with their financial planning needs for more than a decade: 952.820.1983; ct*****@********ml.com.
