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Mark Zuckerberg Responds to Critics, Explains Where His Money Is Going

An LLC offers more flexibility than a charitable trust, though not the tax benefits.


Facebook CEO Mark Zuckerberg wants to clarify a few things about where his Facebook fortune is (and is not) going.

Zuckerberg on Tuesday announced that he and wife Priscilla Chan plan to give away 99 percent of their fortune over their lifetime — a pot of money currently valued around $45 billion.

For about an hour, Zuckerberg was lauded as a hero, a tech billionaire donating his billions. But in the 48 hours since, he has come under scrutiny over how his new venture was established and what, specifically, he plans to spend the money on.

The immediate perception from his announcement was that the money would go to charity, but that’s not necessarily the case. The key issue: Zuckerberg announced he would be funneling his money into the Chan Zuckerberg Initiative LLC, an actual corporation under his control that can even turn a profit, versus a more traditional philanthropic setup, like a charitable trust.

An LLC allows Zuckerberg to spend money however he wants and on areas that he’s personally interested in advancing. The LLC distinction means he’s not obligated to spend it on charity; the money can be used for political donations, too. Right now, his areas of interest include “personalized learning, curing disease, connecting people and building strong communities,” he wrote.

Here’s a helpful Bloomberg story from Wednesday that explains the benefits of an LLC.

And here’s how Zuckerberg explained his decision in a follow-up post Thursday afternoon, clarifying that his new venture isn’t giving him tax benefits or intended to make a profit on the side:

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.

The fact remains, though, that Zuckerberg can spend his billions wherever he wants — and that doesn’t mean you’ll agree with how his money is dispersed. “Connecting people,” for example, is intentionally vague. That’s Facebook’s mission, after all, and I’m not sure many people would consider a donation to Facebook to be a charitable gift.

Zuckerberg’s money may all go to charity someday. It could also go toward colonizing Mars. We won’t really know where the money is going until we know where the money is going. But at least we know why he’s starting another company instead of a charitable trust.

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