Mark Zuckerberg, the co-founder and chief executive of Facebook, announced Tuesday, otherwise known as Giving Tuesday, that he would donate 99 percent of his Facebook shares to charity over the course of his lifetime. Zuckerberg and his wife, Priscilla Chan, made this announcement public via an open letter to their newly born daughter, Max. These shares are estimated to be worth about $45 billion.

Mark Zuckerberg announced the creation of Chan Zuckerberg Initiative LLC on Tuesday and has since received significant backlash. PHOTO VIA FLICKR USER BRIAN SOLIS

Mark Zuckerberg announced the creation of Chan Zuckerberg Initiative LLC on Tuesday and has since received significant backlash. PHOTO VIA FLICKR USER BRIAN SOLIS

$45 billion is a huge sum of money, so naturally many wonder how Zuckerberg will allocate all of these shares and to which causes he will donate. Instead of setting up a traditional, non-profit charity, such as the Bill & Melinda Gates Foundation, Zuckerberg has decided to set up a limited liability company, also known as an LLC. The Chan Zuckerberg Initiative LLC is a different type of business structure compared to typical charity structures. An LLC allows for more flexibility in deciding what to do with all the money. While typical charities have specific rules and regulations on where to donate, how much to donate, and the controversial issue of taxation, an LLC does not have any of these regulations. While Zuckerberg will still be individually taxed on any gains the LLC sees, the LLC itself will not see any additional taxes

Many are skeptical of Zuckerberg’s plan and are questioning his true intentions. Because LLCs do not have a corporate tax, many believe Zuckerberg is doing this simply to transfer his huge sum of money into a structure that is safe from taxation. The important concept many are failing to see is that Zuckerberg is still being taxed. As an individual he will continue paying taxes, but with the creation of his LLC he is simply avoiding a double taxation.

Instead of looking at this in a cynical way, in which Zuckerberg’s chief motivation is to escape as much taxation as possible in order to retain all of his wealth, there is a more positive outlook, which is probably correct. Zuckerberg is simply making a strategic business decision. By avoiding this double taxation, more money will be left for donation. If Zuckerberg put these shares into a corporation, he would lose some of his money to taxation, in which political figures will be the ones to decide how to spend his money. This LLC allows him to have the most money possible to donate where he sees fit.

In their open letter, Zuckerberg and Chan wrote that they wanted to donate to issues that are becoming increasingly prevalent, and will especially affect their daughter’s generation, such as heart disease and cancer. With Zuckerberg being only 31 years old, the most demanding issues of his time now may be drastically different when he’s older. The main issues 50 years ago are not all the same as the main societal issues we face today. This LLC will allow Zuckerberg to donate to whatever causes he deems the most necessary and enable him to continue donating throughout his entire lifetime. In response to the negative feedback Zuckerberg and Chan have received after the creation of an LLC, I say that their main intentions of donating the most money possible over the course of their lives seems like a pretty philanthropic endeavor.