This is an interesting question in that it shows the very generally ignored good side of the American business person. That said, the most important thing that you should do as a business person is to continue in business, so that you may donate to charities. This generally requires that you make a profit first and then establish a budget. At that point I would say that it is a personal call. Some business people donate 10% and some 20% or more!
Hi: that is a very personal decision. I am glad to hear a question about that. Some tithe 10%-others Give what they can afford.
Whatever guideline you use, such as a % of gross revenues, or a % of net, or a flat amount, you should consider involving your employees in the decision where to donate some or all of the amount. This can be a great team-building, morale building and retention tool. You can also consider letting your clients or customers know about the charitable gifts and that the money has been donated in their name or honor. We always get a very warm reception and response to such an announcements.
It’s always encouraging to know that businesses are eager to give back to their communities. In addition to benefiting others, charitable giving makes your company eligible for tax deductions.
As other responders have mentioned, how much you choose to donate is a personal decision—however, according to the Chronicle of Philanthropy, small companies gift an average of 6% of their annual profits to charity. Whether you donate 2% or 20% of your revenue, there are creative ways to accomplish your giving goals effectively and ensure you receive the tax breaks you’re entitled to.
Generally, only charitable gifts made to 501(c)3 or 501(c)19 nonprofits are tax-deductible. If you’re in doubt about a charity’s status, check an online resource such as Charity Navigator to determine whether your gift will entitle you to a tax break. Always keep detailed records of your donations and remember that charitable gifts are deductible the same year in which they were donated.
To maximize their impact, some companies choose to involve their employees in their charitable giving strategies. For example, many businesses offer to match donations made by their employees or authorize paid time off for their staff to volunteer during the workweek. In addition to cash, your company may choose to donate products and services—a practice known as “in-kind” giving. When you donate products, the value of your gift is tax-deductible (although with certain limits and restrictions). While volunteer hours aren’t tax-deductible, you are eligible to itemize associated out-of-pocket expenses (such as gas, office supplies, etc.) on your company’s tax return.
Depending on the size of your company, you may also consider establishing a tax-exempt corporate foundation. In addition to allowing your company to make tax-deductible charitable gifts or grants, the income of your foundation—including investment earnings and capital gains—will be exempt from income tax.
No matter how—or how much—you choose to donate to charity, working with a financial planner can help you create a corporate giving strategy that will maximize your impact while minimizing your taxes.
I think that there needs to be consideration given on 2 levels. First the amount of impact the business wants to have in a community and secondly the tax benefits that the company wants to reap. Although the secondary benefit should be considered much lighter than the first, it still makes an impact on making prudent business decisions.
Hi Jason! I commend you for your philanthropy. I agree with the group to give what you feel comfortable with, but remember that giving back to your community may include time and not just money. For example, at our local food pantry, a dentist staff offers once a month free dental care for the needy. I have a background in curriculum design and development, so I was able to help them create new class curriculum surrounding budgeting, needs and wants and other financial topics of interest to this group. Money goes a long way, but so do your time and talents.
I own three businesses and it is wonderful that you are thinking about helping out charities. This is especially true if they are local in your city. You can do good and make a great business impact at the same time. We have never put an actual percentage on this number. We have always thought it should be some combination of time and money. The amount will likely depend on the gross revenues of the company and your overall business/market strategy. However, it's charity- so do what seems right from your heart without breaking the bank to make the business run.
First of all give what you want. You are the boss. There's a lot to be said for the great feeling of charity. But if you want the numerical advice, then I would donate enough until it isn't beneficial to do so...until next year.