If you’re a business owner, at some point you may begin thinking about an exit strategy. Before you start putting out feelers to potential acquirers, you may wish to explore the benefits of contributing an ownership interest in your business to a donor advised fund or other type of fund at the Community Foundation of New Jersey.
If you’ve owned your business for several years–or decades–you could be sitting on substantial unrealized capital gains thanks to the increasing value of the business over time. Upon a sale, capital gains tax will be triggered, reducing the proceeds you get to keep. No capital gains tax will apply, however, to the sale of any portion of the business owned by your donor advised fund. Because of the favorable rules governing the taxation of charitable organizations, your donor advised fund is likely to net 100 cents on the dollar for the portion it owns. The sale proceeds received by the donor-advised fund are immediately available for you and your family to enjoy by recommending grants from the fund to favorite charities, in whatever amounts and according to whatever schedule aligns with your philanthropic values.
If you own a business and like the idea of potentially giving a portion of the business to a donor advised fund or other type of fund at the Community Foundation, please reach out to our team. We can help you and your advisors evaluate your options and ultimately prepare for the transaction, including reminding your advisors to secure a proper valuation for the charitable deduction at the time a portion of the business interest is contributed to your donor advised or other type of fund.