This Is Why It Pays to Be Charitable Year Round
Learn the benefits -- both tangible and intangible -- of charitable giving for businesses.
As the holiday season approaches, many business owners are thinking about scheduling parties, buying gifts for key customers and calculating employee bonuses. But now is also the perfect time to think about charitable giving. Year-end gifts are not only important for the recipients, but they can also be extremely beneficial for the companies that make them.
But charitable giving shouldn’t be restricted to the holidays. Nonprofits and other charities are always looking for funding to help them accomplish their goals. Giving to these organizations throughout the year is not only a good thing to do, but it can also deliver big benefits to your business.
Those who are successful in business have a fundamental obligation to give back and share the wealth. Rich people who believe themselves to be better than others, who only hoard and consume, invariably live sad lives. They miss out on the true joy and deeply human experience of helping and being of service to others.
Charitable giving is truly one of the great privileges of running a business. Entrepreneurs can share their success by giving generously to causes that matter to them. During the holidays, small-business owners can make a difference by donating money, products, volunteer hours and charitable outreach efforts to organizations in their community and around the world.
One of the most tangible business benefits of charitable giving is the charitable-donation tax deduction it provides. Such donations can include sponsorships of charities or events, donations of inventory or services, and cash donations.
Before taking the deduction on your tax return, however, you will need to make sure it qualifies, and you will need to get a tax form from the charity or nonprofit to file with your tax return.
Recent legislation helps businesses and individuals take advantage of these deductions. Individuals may deduct qualified contributions of up to 100% of their adjusted gross income, while C corporations have an increased corporate limit of 25% of taxable income for charitable cash contributions made to eligible charities during the calendar year 2021.
You might also consider creating a charitable foundation, to which you make regular contributions. Critically, for every dollar you contribute to such a foundation, the tax laws allow you to write off an equal amount from your business’s bottom line.
Because charitable deductions can be challenging, it’s always important to seek professional guidance. A donor-advised fund may provide some relief by letting you donate enough money upfront to become eligible for deductions this year while the fund holds the money until you’re ready to distribute it.
When you engage in acts of charitable giving, you demonstrate to your workers that you care about more than just the bottom line. Especially in this time of labor shortages and heightened employee activism, charitable giving could translate into a greater likelihood of attracting the type of candidates you want working for you.
Offering your employees the opportunity to volunteer their time to community causes or to participate in other acts of philanthropy will reinforce the idealism that is part of your company’s core mission. It can also boost employee morale and make your workplace a happier place to be.
Community engagement, not just during the holidays but throughout the year, is also a great way to relieve stress and build lasting bonds. Time spent in volunteer activities helps workers let their hair down and interact with each other outside of the office. It can also provide them the satisfaction of giving back to the community that supports your business.
While you should never do good to get something back or as a marketing ploy, a simple act of kindness can also help build goodwill for your business. Companies that give back are perceived in a more favorable light; they are branded as “good” corporate citizens on social media and in the news. When your business makes a charitable donation, it helps those in need, but it also shows the world that your company has a heart.
And people notice. Increasingly, consumers choose to spend their money with businesses whose values align with their own. According to a 2010 study by Cone Communications, 85% of consumers favor businesses that give to a charity that they care about.
Charitable giving has a significant ripple effect. When a business supports a charitable cause, it strengthens its relationship with its existing customer base and attracts new customers. It also shines a spotlight on a nonprofit that deserves public notice, increasing the level of public awareness and donations.
The most important step is finding an organization or a cause that fits with your company’s values. Once you’ve chosen an organization that you will support with your time, your dollars and your megaphone, see if that organization will return the favor. Ask the charity if it can publicize your support on its website or in its donor newsletter.
It feels good
Tax deductions and customer goodwill are wonderful reasons to make charitable gifts. They will undoubtedly help your company’s bottom line. But the fundamental reason for giving to others has nothing to do with taxes and sales. It has to do with doing the right thing.
Charitable giving feels good because it is good. When businesses succeed and thrive, they become capable of doing amazing things. This doesn’t just mean curing cancer or flying to the moon. It can also be providing meals to those who are hungry, teaching skills to underprivileged youth or ensuring that there is a warm place for homeless families to sleep.
Entrepreneurs have dreams, energy and vision. These create and build businesses, but they also strengthen and support communities. This holiday season, make your business stronger by making your world better.
Entrepreneur Leadership Network Contributor