Disruptive Philanthropy: Zuckerberg, the Limited Liability Company, and the Millionaire next Door

Abstract

Facebook founder Mark Zuckerberg and his wife, Dr. Priscilla Chan, announced they would give 99% of their net worth to – in their words – “advance[e] human potential and promot[e] equal opportunity.” To make good on this promise, however, they did not set up a traditional nonprofit, tax-exempt organization. Instead, they founded the Chan-Zuckerberg Initiative, a for-profit, limited liability company. The bulk of this Article provides the definitive explanation for this seemingly bizarre choice. Most importantly, the philanthropy LLC structure offers donors the flexibility to bolster charitable grantmaking with impact investment and political advocacy, free of the restrictions, penalties, and transparency requirements applied to tax-exempt vehicles. In addition, the LLC form provides donors complete control over the organizations they found, including an ability to reclaim donated assets that is absolutely prohibited in nonprofit forms. With careful planning, all of these advantages can be gained at relatively little tax cost. The philanthropy LLC is poised to spread far beyond Silicon Valley to the millionaire next door, a development with the potential to do both good and harm. In its concluding section, the Article explores how a turn to for-profit philanthropic vehicles can both unleash tremendous capital for solving society’s most challenging problems and magnify the influence of our most powerful elites.