Threading the Needle: Donating Business Interests to Charity
Because business owners are focused on the growth and success of their business, they may not have philanthropy on their radar right away. However, if they decide to sell their business, they have an opportunity to make a major impact for the causes and organizations in their community that matter to them.
Often referred to as “donating closely held business interests”, including charitable giving and benefits in a business sale can be incredibly nuanced and complex – as tricky as threading a needle. Despite the challenges, working with a professional advisor on strategic planning well in advance of the sale can help individuals do exponentially more in their community while taking advantage of tax savings.
GTCF spoke with Professional Advisor Tom Ryan, Vice President of Berstein Wealth Management. He has experience with transfer of business sales, donating closely held business interests, tax benefits, and philanthropic impact.
GTCF: How often have business owners wanted to include philanthropy when working with you during a business sale?
Tom Ryan: Frequently! So many of our Puget Sound area entrepreneurs are interested in paying it forward into their communities.
Often times, they have always had an interest in engaging more deeply in philanthropy but have not had the time or cashflow to do so in a meaningful way as they have been solely focused on growing their businesses. As they approach a potential exit, their focus shifts to ways they can use their windfall to support causes they care about.
GTCF: What have business owners said when they discovered the opportunity to make a difference in their community with a transfer of business sale?
Tom Ryan: They are excited but often also overwhelmed. While they may have always known they would use some of their assets for philanthropic purposes, when it comes time to write the check, likely an order of magnitude larger than they ever have before, they may be overcome by the responsibility that comes with the ability to make a meaningful donation.
They want to be good stewards and maximize the value of each contribution and probably haven’t had the time to research the areas and specific organizations they care about. For those that find themselves in this position, a DAF can be a great way to secure the tax benefit while buying time to select the ultimate charitable beneficiaries.
For those new to philanthropic giving, pairing them with a philanthropic advisor can be a great way to jump start this process and reduce the overwhelm some owners feel.
GTCF: Do you find business owners are mostly interested in tax savings, or do they also want to make a difference in their community?
Tom Ryan: While we do run into the occasional owner whose giving is purely tax motivated, the vast majority are motivated by the impact they can have and are happy to enjoy the tax benefit along the way!
GTCF: What challenges do Professional Advisors face in supporting clients who want to ‘thread the needle’ to achieve philanthropic goals during a business sale?
Tom Ryan: Timing! Valuation! Indecision!
One of the difficulties in threading the needle is that it requires the business owner to engage in making a complex and irrevocable decision at one of the busiest and most stressful times for their business. The best way to avoid this is by engaging in conversations about the strategy WELL before a sale is contemplated.
There are many options to explore when considering philanthropy as part of a sale of business. At GTCF, individuals can establish a private foundation, Donor-Advised Fund (DAF), Designated Fund, or donate directly to their charities of choice. In addition, GTCF’s individual philanthropic advising for Fund Advisors supports people in building a strategy and making community connections to achieve their philanthropic goals.
GTCF will take an in-depth exploration of “Threading The Needle: Key Considerations When Donating Business Interests to Charity” with Ashley Velategui of Alliance Bernstein Wealth on Tuesday, November 8, 730am-930, at the Tacoma Elks Lodge at Allenmore Golf Course.
Event topics will include:
- Identifying values and prioritizing goals and objectives
- Who should be on your team
- Key factors that influence potential success
- Rules and limitations associated with contributions of business assets
- Choosing a giving strategy
- Case studies
This breakfast event is part of its Professional Advisor philanthropic services support.
Pending approval, this event will offer the following Continuing Education Credits:
1 CE Credits
1 CLE Credits
Certificate of Completion for 1 hour provided for CPE
Register today to attend.