Wednesday, December 2, 2015

5 things to know about 99% of Zuckberg's wealth


Facebook is going out of its way to emphasize that CEO Mark Zuckerberg's pledge to give away 99% of his company shares is not about charity, but philanthropy.

The initiative is set up as an LLC, not as a charitable trust. This means that the LLC can do whatever it wants, including private investments generating profits. And yes, it can retain its profits and not give it to charity.

While charity will certainly be one of the money’s destinations, it will be far from the only one. The money, according to a Facebook SEC filing, will go to “philanthropic, public advocacy, and other activities for the public good.”

If you think Mark Zuckerberg is giving up 99% of his US$45B to Charity, you are wrong. Many rich people do this, and let me explain to you why they are doing this. It is not out of the kindness of their hearts or Altriusm, but rather, it makes economic sense.

1) Pay less taxes

This is a troubling trend and most of the rich do not pay much % of tax as part of their salaries. And yes, if Mark Zuckerberg puts his money into this initiative, 99% of the money will not need to pay capital gains tax.

So in simple terms, "Mark Zuckerberg will transfer ownership of his Facebook stock without paying capital gains taxes." His kids will also have everything, untouched by estate taxes.

2) Its an LLC

As an LLC, you can do whatever kind of investment he wants. It can use SOME to focus on his philanthropic goals, but most of it to generate more profits. Not a bad thing actually as more money it acquires, the more it can use for philanthropic purposes, but it is not primarily for philanthropic goals as it is not setup as a charitable trust.


"The Chan Zuckerberg Initiative will pursue its mission by funding non-profit organizations, making private investments and participating in policy debates, in each case with the goal of generating positive impact in areas of great need,” it said. “Any profits from investments in companies will be used to fund additional work to advance the mission.” (From Buzzfeeds)


3) This is not happening immediately.

The Facebook founder is not giving away 99% of his Facebook shares all at once. He will be doing it over the course of the rest of his life.


4) Moving money to his own organization

Rather than give to existing nonprofits, business leaders are increasingly siphoning their fortune into their own organizations.

"Just because you were successful in the for-profit world doesn’t mean that nonprofits are a bunch of bleeding-heart idiots that need you to come in and show them how it’s done,” Ken Berger, the managing director of the social-good data service Algorhythm.


5) Facebook does not need tax benefits

With this move, Zuckerberg no longer need to depend on tax benefits, he is able to give up his stocks, pay less taxes and remain in power of his company.



So is this a good or bad thing?

It is too early to tell, but you can be sure that this is a smart thing for anyone that rich to do.

-- Robin Low


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