The Business of Doing Well By Doing GoodAug 25, 2017
The Federal Small Business Administration reports that about 75 percent of small business owners donate some portion of their profits to charity each year with the average contribution being around six percent of earnings. Fulfilling philanthropic intentions has emotional rewards and there are potential tangible benefits for your business. The more you align your charitable intentions with your own passions, the greater the potential payoff.
One possible advantage is that your company’s employees may truly get involved in your charitable activities. Consequently, they may become more productive overall and have longer tenure.
The opportunities to mix business, charity and advocacy are unlimited. For example, a business owner who is a sports fan might support a youth team. If the cause you support relates to the environment, you might mention that your company is supporting a sustainability initiative, an idea that will resonate with many people. Yet another approach is to allow employees to have a voice in choosing charities the company will support.
Business benefits from charitable endeavors can be external as well as internal. A company’s charitable activities should be highlighted on their website and through their social media presence, all of which makes the company memorable to potential customers.
Companies may very well reap tax benefits from their donations. C corporations can deduct charitable contributions depending on business taxable income. Pass-through entities (S corporations, partnerships, LLCs) may pass through such deductions to business owners who itemize deductions on Schedule A of their personal tax returns. If your company receives a direct benefit from its philanthropy – say you support a Little League team that advertises your company’s name on its uniforms – the outlay may be deductible as a business expense rather than as a charitable contribution.
Services provided by a taxpayer or employees are not deductible. However, expenses involved while volunteering, such as mileage, may quality as a charitable contribution. Donations of property might be deductible at fair market value; special rules apply to donations from inventory and fixed assets.
Our Staff can help you determine whether a philanthropic outlay is a business expense or a charitable contribution. We can also explain how to obtain an acceptable valuation and documentation for any goods you might be donating. Maximizing the tax benefits will help your business get the most from its efforts to help others.