Mark Zuckerberg’s gift horse is facing scrutiny, with the Facebook chief executive drawing criticism for creating a company, not a foundation, for the 99% of his Facebook shares that he plans to “give” away during his lifetime.
Zuckerberg responded to the criticism in a Facebook post Thursday, saying donating to charities is great, but it’s not the only way to cure disease, educate the poor and generally improve the world.
Just before Thanksgiving, Zuckerberg and his wife, Priscilla Chan, established the Chan Zuckerberg Initiative, a Delaware-based LLC, or limited liability company, to channel cash to their pet causes.
Zuckerberg said in his Thursday post that he’s deferring tax savings to gain flexibility on spending. An LLC’s fewer restrictions mean his money can go to “the organizations that will do the best work -- regardless of how they’re structured,” he said.
Besides nonprofits, an LLC lets him invest in for-profit companies, such as ones developing energy technologies -- an undertaking that a foundation is unlikely to take on.
“Essentially, Zuckerberg can do everything with the LLC’s money that he can do with his own money,” James Kwak, associate professor at the University of Connecticut Law School wrote in a blog post Thursday.
Some commentators say the structure is smart. It follows what Ebay cofounder Pierre Omidyar and Apple cofounder Steve Jobs’ widow, Laurene Powell Jobs, have done with their wealth. But Kwak described the LLC approach as not so much a “giving pledge,” but a “keeping pledge.”
Other experts suggested that depending on how exactly the LLC is structured, the Zuckerberg-Chan family could save on income taxes by storing cash overseas or get a discount on estate taxes someday.
Zuckerberg said any profits generated by LLC investments would go back toward funding additional work.
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