Why is it important for businesses to make donations to charity?
Small businesses play a key role in the local economy and have the ability to make a significant impact on the quality of life in their community. Giving away even a small portion of a business’s profits can directly impact the lives of people in need. Charitable giving can also be a great way to carry out your company’s core values and mission, whether you choose a charity to support entrepreneurs in your industry or contribute to humanitarian efforts.
Benefits of making business donations
In addition to the personal satisfaction of making a positive impact on others, charitable donations also have strategic benefits for your business. Partnering with charities and making regular donations has several short-term and long-term business benefits like:
Modern consumers are increasingly interested in the ethical values of the businesses they support, so giving to charity can help you develop a positive reputation with customers. Millennials and Gen Z make up a large portion of the market and highly value the philanthropic aspects of businesses when making purchasing decisions. Being generous and prioritizing giving can help you generate positive publicity for your business, showing customers that the money they spend at your business contributes to a good cause. Charitable giving can become part of your brand and differentiate your company from competitors through its social impact.
Partnering with local charities and organizations can help you expand your professional network and meet impactful people within your community. Charitable groups are often central to the social dynamic of a community, and gaining the respect of influential community leaders can help you grow your business through word-of-mouth advertising and support. Contributing to humanitarian organizations, partnering with community groups and showing up to charity events generates positive brand recognition among the people who are most likely to become customers.
Charitable giving not only creates brand recognition, it also encourages customers to make your brand a consistent part of their lifestyle. This is especially true for companies that have a consistent partnership with a charity or factor charitable giving into their business model.
Developing strong culture
Charitable giving has the potential to build a strong company culture and boost team morale. When people feel that they are working towards a greater good, they may become more committed to the long-term goals of their employer. Your employees can experience the positive effects of making a difference in other people’s lives, giving them additional encouragement to work hard other than their salary and benefits. A company’s charitable giving can attract job candidates whose personal values align with company giving, creating a cohesive and unified team that is excited about their work.
Creating a legacy
The impact of your charitable donations can help your business’s legacy last far beyond its current projects. Companies that form charitable foundations create a lasting infrastructure that can keep giving to people years into the future. Your charitable donations can make a significant impact on individual’s lives that they will remember and appreciate.
Giving to charity also has financial benefits through tax deductions. Not all donations are tax-deductible, but many types of donations can save your company money, especially if you are donating inventory and services that you already have access to. Charitable deductions are tax-deductible in the same year that they were made, allowing you to take advantage of the financial benefits quickly compared to the long-term benefits of giving.
How to find charities for your business
Before you write a check, spend time researching charities to ensure that you are being intentional with your donations. Choosing a charity that aligns with your organization’s values is key to reaping the full benefits of your contributions. Follow these steps to identify the best charities to partner with:
1. Determine your values
Before assessing whether a charity meets your standards, clearly identify your most important company values. Even if you give to multiple charities, having unified core values with your charitable partners helps develop a clear brand message. It also ensures that your personal vision for the company and employee values are being taken into account when making financial decisions.
2. Consider what you have to offer
Determine what resources your company can give to charity and think about what kinds of organizations would benefit most from that specific kind of assistance. Some organizations prefer cash donations while others are happy to accept volunteer hours, supplies or free company services.
3. Start locally
Before donating to national charities, research organizations in your local community. Your money can make a larger impact when you give to organizations that do not have significant publicity. Look for programs at local schools and shelters to find ways to make a direct impact on a neighbor in need, or ask employees what local causes they support to get ideas.
4. Vet each charity
Research organizations before making a donation to ensure that your money and resources will be put to good use. Look up each charity’s financial information on how they distribute donations, looking for transparency and financial stability. If you plan on making itemized deductions on your taxes, make sure the charity is a public tax-exempt 501(c)(3) organization.
Ways to donate to charity
Businesses at any level of financial success can donate to charity in some way, whether through donating cash or simply sharing their time and expertise with others. Some popular methods businesses give to charity include:
Writing a direct check to a cause is a straightforward and simple way to make a charitable donation if you have the budget to do so. After making a donation online or in-person, keep a record of your donation for any future write-offs.
When you give away inventory, office supplies or offer pro-bono services to a charity, this can be an in-kind donation. Giving in-kind gifts to charities also provides businesses with the knowledge that their resources are going directly to the charitable mission they are most excited about.
Facilitating donation of supplies by holding donation drives at your workplace is another great way to get involved with a charity. It allows employees to contribute and connects people in need with others’ excess goods like canned foods, sanitary items, clothing or books.
Creating a foundation
Larger businesses may have the capital to form a trust or a foundation that uses interest on a lump sum to make ongoing charitable contributions such as scholarships or grants.
Creating group volunteering opportunities for employees can help them feel directly involved in a company’s charitable mission while providing much-needed manpower to local organizations that need help. Volunteering is a great way to donate time while building interpersonal relationships with important community partners.
Sponsoring a local youth group or another charity is a donation method that also generates publicity. Providing the location or supplies for a fundraiser or other event in exchange for displaying your company name is a common practice when partnering with a charity.
Frequently asked questions about charitable donations
What are the different types of donations?
The key types of donations a company can make are money, services and supplies. Some charities only accept cash or goods, while others look for free services from local businesses to improve their administration and save money on operating costs.
How do you make donations?
You can make donations by giving directly to a charity or by using a donor-advised fund, which is similar to a savings account. With donor-advised funds, you contribute a lump sum to the account and then over time select charities to distribute your assets. This allows you to get the tax benefits of a donation right away.
How much of a donation is tax-deductible?
Most charitable business contributions allow you to make a 50% deduction on your taxes. However, some circumstances have limitations that result in a lower deduction. Consider speaking to a tax advisor before listing a charitable deduction on your taxes to ensure you are eligible for the deductions you want to claim.