After Zuckerberg announced earlier this week that he and his wife, Priscilla Chan, had formed the charitable initiative, questions emerged as to why they decided to structure it as a limited liability corporation.
Zuckerberg wrote in a post Thursday (embedded below):
The Chan Zuckerberg Initiative is structured as an LLC rather than a traditional foundation. This enables us to pursue our mission by funding nonprofit organizations, making private investments and participating in policy debates–in each case with the goal of generating a positive impact in areas of great need. Any net profits from investments will also be used to advance this mission.
By using an LLC instead of a traditional foundation, we receive no tax benefit from transferring our shares to the Chan Zuckerberg Initiative, but we gain flexibility to execute our mission more effectively. In fact, if we transferred our shares to a traditional foundation, then we would have received an immediate tax benefit, but by using an LLC we do not. And just like everyone else, we will pay capital gains taxes when our shares are sold by the LLC.
What’s most important to us is the flexibility to give to the organizations that will do the best work–regardless of how they’re structured.
Readers: What did you think of Zuckerberg’s explanation?