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Retiring Into Philanthropy Strategies For Business Owners

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Five strategies to help you extend your philanthropic legacy beyond the sale of your business.

Once you leave the day-to-day operation of your company to others, your commitment to the causes and charitable organizations that you supported through your business need not end. With some strategic planning, similar to what you practiced throughout your business career – identifying market needs and optimizing your resources to fulfill them – you can maintain a charitable presence in the communities where you want to make an impact while building on the goodwill your business has created.

Business owners are quite charitable

Nearly 68% of business owners intending to sell or pass their business down to a family member within the next five years, plan to donate to charity in conjunction with that transition.1

Where to Begin

Here are five strategies to help you make the most of your transition from a business owner to an individual philanthropist.

1

Understand Why This is Important to You

As you would do with a company mission statement, take the time to understand what you want to do through philanthropy and why. Being able to articulate your expectations, goals, and strategy will help you focus your own efforts, and assist in engaging and gaining the ongoing commitment of others, including family members, to sustain the legacy you are creating.

2

Leverage Your Existing Network

The personal and business relationships and networks you built over the years are likely to include individuals who are similarly inclined toward giving. Just as in business, these acquaintances can help you identify meaningful opportunities you can support and introduce you to leaders of the nonprofits that would most benefit from your experience and resources.

For Example

A business owner involved in textbook publishing is likely to appreciate the value of education to personal and community growth. Supporting charitable organizations involved in college-readiness programs for students from lower-income homes would leverage this expertise along with valuable industry connections to promote these life-altering opportunities.

3

Be Open to New Opportunities to Have an Impact

You need not limit your charitable pursuits to those you have supported in the past. Just as companies often adapt to changing economic opportunities and operational realities, your giving strategies should have the flexibility to evolve with your interests and the needs of the communities and causes you support.

4

Plan for Potential Tax Consequences

As with a company, incorporate the advice of your team of professionals. Involve your tax, investment and legal advisors in your decision on how best to structure and fund your charitable activities. From which assets to use, to the legal or operational requirements and the tax benefits of the various charitable giving vehicles, the choices you make in structuring and establishing your philanthropic endeavors can help you give wisely. Also, the more efficient you are in managing the tax implications to you, your family and the causes you support, the more effective your philanthropic efforts will be.

Funding options

Options for funding charitable activities include:

5

Engage Family Members in Giving Decisions

Charitable giving can be the “glue” that encourages family engagement and participation after selling a family business. It creates the opportunity to work together toward shared goals and purposes, which can improve and strengthen the bond within and across generations, especially if the family’s philanthropy is facilitated through a permanent giving vehicle such as a private foundation. For younger family members, involvement in managing a family foundation has the added benefit of helping them develop business acumen and leadership skills.

Conclusion

Just as you solicited the advice of experts and financial, tax and legal experts as you built your company, and later developed a leadership succession plan, do not hesitate to rely on those trusted advisors as you transition into your new life after sale. They can help you succeed on your own terms, regardless of what phase of your life you are entering.

Business Owner

Retiring into Philanthropy

Learn more about successfully transitioning from corporate to individual giving.

THE NORTHERN TRUST INSTITUTE

Proven Advice for Moments that Matter

  1. Entrepreneurs as Philanthropists – Understanding Entrepreneurs’ Unique Approach to Giving, Artemis Strategy Group, 2018.

Disclosures

This information is not intended to be and should not be treated as legal, investment, accounting or tax advice and is for informational purposes only. Readers, including professionals, should under no circumstances rely upon this information as a substitute for their own research or for obtaining specific legal, accounting or tax advice from their own counsel. All information discussed herein is current only as of the date appearing in this material and is subject to change at any time without notice.

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