zahid lilani

When the Guy in Grey T-Shirt Creates an LLC

Many people who have more grey hair than me have dissected the publicly disclosed information and made exaggerated judgement calls on non-disclosed private information. I feel like I am missing out. FOMO people, it’s a Valley thing.

Two of my favorite things in life are taxes and tech (coffee too). So let me enlighten you. I am not kidding about taxes.

The Hoopla

Q. Why did the Grey T-Shirt create a charity? We already have enough charities.
A. To get LIKES. And, he created an LLC, not a charity.

Q. Wait, an LLC? Why not a REAL charity?

Q. HUH, but why?
A. Definition of CONTROL: “Determine the behavior or supervise the running of.”

Say Why an LLC One More Time

Q. Okay, calm down. Why not donate it to his buddy’s Foundation?
A. SEAHAWKS. Total deal breaker, brah!

The Jargon

Limited Liability Company (LLC) is a flow-through entity. Income (losses) generated by the LLC are passed down to its member. It’s created to limit liability to the extent that the LLC has assets. Obviously.

Member = Grey T-Shirt

LLC is like a tea strainer, it filters the juice that’s already been sucked out of tea leaves. You get the liquid.

Tea Strainer

Q. Everyone with single-digit IQ claims he is engaging in tax evasion?
A. What part of “LLC is like a tea strainer” don’t you understand? Are you American?

Let me explain, seriously.

Charities have to distribute every dime, LLCs can keep accumulating and distribute at the “right” time. Example:

Current Year

Day 1: Transfer stock to LLC (share value $5) — > not a taxable event.
Day 14: LLC sells the stock (share value $10, gain $5) — > taxable event.
Day 30: LLC takes the gain, donates it to charity (or just keeps it in the bank) — > taxable event.

New Year

Day 105: The couple files their tax return on time. The $5 deduction is limited to 30% or 50% of Adjusted Gross Income. (IRC section 170(b)(1)(C)). The income from gain is taxed at 0%, 15% or 20% capital gains tax rate depending on the tax bracket. Something tells me, the couple is in a high-tax bracket. Doctors make good money y’all.
Day 135: LLC files its tax return on time. LLC is a state concept, not federal. California LLCs have a minimum payment of $800 + LLC fee depending on income. Max fee is capped at $11,790.

Remember the tea strainer? Everything has flowed through to the couple. It’s just like not having an LLC.

If the Grey T-Shirt had created a charity instead of an LLC, he would have received the tax benefit RIGHT AWAY. With the LLC, he is deferring the benefit to future years and will pay his fair share of taxes when there is a taxable event (as described above).

The Trend

Pundit’s are calling it “venture philanthropy.” Can someone please add that to Silicon Valley Dictionary?

Silicon Valley’s one hit wonder, Pierre Omidyar, was one of the first to experiment with this new form of philanthropy. His organization does a little bit of lobbying and a little bit of charity, ain’t no harm in that.

Remember the guy in the black turtleneck and Gandhi glasses? His widow, Laurene Powell Jobs, did the same thing with the money he left behind.

This trend is here to say. It’s not over until Jack Dorsey says it is.

I don’t think it’s on his radar right now. And I can understand that. Can you imagine waking up every day and trying to figure out if you should first show face on 1355 or 1455 Market St?

Decisions, brah!

The reason LLCs are suddenly being talked about during half interesting conversations is because the guy in the Grey T-Shirt has an enormous amount of “status update” value. He is the only CEO of a publicly traded company in the world who directly communicates with his products (you). And that makes some of you feel that he owes you clarification.

The Legacy

Not everyone wants to buy a sports team. It’s what guys from Seattle do. Then again, no one wants to be remembered as the guy who got rich off of other people’s inability to be productive at work.

Mark Zuckerberg is living a life 99.99% of us can only dream of. He gets to wake up every day and be part of something big. Connect the world.

Money is not the motivation for his kind of serial problem solver.

He is learning, or should I say, has learned from his $100 Million blunder. And he doesn’t want to sit on the sidelines. Just paying taxes or donating to random charities is a total cop out. There’s no mental stimulation with that kind of work, that’s second nature to wealthy folks.

Let him be, it’s his money we are debating about here. He can flush it down the toilet if he wants. You buy $4 latte every day, don’t you?

Parting thoughts

If by now you are no more or no less informed about rich people and LLCs, don’t worry, that makes two of us.

You should give me a pass this time, it’s my first post on Medium.

Thank you, Grey T-Shirt for giving me an opportunity to spend 3 hours writing about LLCs. Apologies to you (the reader) for wasting 5 minutes of your time that you could have spent on Facebook.

Hopefully, that didn’t tank the stock.

Do you know what’s cooler than transferring $45 Billion to an LLC?

Becoming a Parent

Photo credit: Reuters