Why the Chan Zuckerberg Initiative Is an LLC

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Facebook co-founder and CEO Mark Zuckerberg responded to questions about the Chan Zuckerberg Initiative philanthropy organization with a clarification post.

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?

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Mark Zuckerberg Welcomes Baby Max, Announces He's Giving Away 99% of his Facebook Stock

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Facebook CEO Mark Zuckerberg and his wife, Priscilla Chan, have welcomed their first child – a daughter named Max – into the world. Zuckerberg announced Max’s arrival in a Facebook post, using the updated Notes platform to publish a letter to his newborn daughter, noting in his introspective and thoughtful post, that he and his wife are planning to give away 99% of their Facebook stock – currently valued at around $ 45 billion – to charitable causes in order to make the world a better place for Max and all children of the future.

Facebook has followed Zuckerberg’s post, announcing that Zuckerberg will give away no more than $ 1 billion of his shares per year for at least the next three years, which means Zuckerberg will maintain voting control of Facebook for the foreseeable future. It’s an admirable move, and one which also, in some ways, highlights Zuckerberg’s eventually exit plan from the social giant he created in a dorm room many years ago. In his 2,200 word post, Zuckerberg explains that personalized learning, curing disease, connecting people and building strong communities will be their initial areas of focus for investment. Zuckerberg’s impassioned and thoughtful essay focuses on realizing the full potential of humanity and promoting equality in order to create a world where people can become whoever and whatever they dream to be.

“We must make long term investments over 25, 50 or even 100 years. The greatest challenges require very long time horizons and cannot be solved by short term thinking.

We must engage directly with the people we serve. We can’t empower people if we don’t understand the needs and desires of their communities.

We must build technology to make change. Many institutions invest money in these challenges, but most progress comes from productivity gains through innovation.

We must participate in policy and advocacy to shape debates. Many institutions are unwilling to do this, but progress must be supported by movements to be sustainable.

We must back the strongest and most independent leaders in each field. Partnering with experts is more effective for the mission than trying to lead efforts ourselves.

We must take risks today to learn lessons for tomorrow. We’re early in our learning and many things we try won’t work, but we’ll listen and learn and keep improving.”

It’s an interesting read, and an interesting insight into the mind of a man who has risen to one of the most powerful positions in modern media. And while Zuckerberg’s announcement doesn’t flag any imminent changes at The Social Network, it does go someway towards further underlining his ambition for Facebook, and his mission to make the network a central part of everyday life. For everyone. And if that helps us get closer to the goals laid out in Zuckerberg’s vision, I’m all for it. 

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