Debate continues to mount on whether or not closely held businesses should be open to making charitable donations or commitments, an issue confronting owners of such businesses across the globe.
The question, as proposed in a recent publication by Rivkin Radler LLP, is far from rhetorical, urging business owners to thoroughly consider this query before transferring or committing any business assets to a charitable organization.
For the uninitiated, a closely held business is one in which the majority of shares are owned by a small group of individuals. These businesses, as opposed to publicly traded companies, have the ability to create their own niche in the marketplace, operate on a smaller scale and maintain a higher level of privacy in their operations.
Yet, the idea of such businesses being charitable comes with its own set of dilemmas. Firstly, issues have been raised over the framework of this proposed model of operation. Critics argue that it’s faulty and needs thorough revision to make it easier for these businesses to navigate the possible legal and financial obstacles that can arise from such donations.
Secondly, the owners of these businesses need more clarity on the implications of transferring their business assets. For instance, how would it impact revenue, profitability and sustainability of the business in the long run? Furthermore, understanding the potential tax implications involved in these transactions is critical to make a sound judgement.
In conclusion, the debate is far from settled and warrants more discourse, research and overall understanding. However, it’s critical for owners of closely held businesses to analyze the potential impact these decisions could have on their business operations before transferring any business assets to charitable entities.