It’s the season of giving, when many small business owners make charitable donations through their companies. Small businesses receive many rewards from philanthropy, both personal and financial, and it presents an opportunity to help their community. About 75 percent of small business owners donate a portion of their profits to charitable organizations annually — an average of about six percent.1
Benefits of giving to charity
As a small business owner, charitable giving and participating in community philanthropic events lets you highlight what your company is dedicated to and can provide prospective employees and customers with an understanding of your company values. Approximately 85 percent of consumers have a more positive impression of a company that supports a cause they care about.2
The positive effect on employees
Employees who react favorably to their employer’s charitable activities are five times more likely to remain with their company.3 And, when employees can volunteer with their colleagues in workplace-supported programs, they report stronger relationships with co-workers.4
Looking for the right fit
When considering a year-end donation, the charity you choose should be a good fit for your company. That could mean supporting a cause related to your business and customer base. A gourmet market, for example, might donate to a food bank.
To boost local brand awareness and customer relationships, consider choosing a charity based in your community. In addition, ask employees for suggestions, even putting the choice up for a vote. This can boost morale and demonstrate how much your team’s opinions are valued.
Ways to be philanthropic
While donating revenue to charity is impactful, there are other creative ways to be philanthropic. Consider gifting a certain percent of the bonus pool to a charity. Or commit to donating a portion of revenues based on a set period or on the sale of a specific product. You might also match monetary gifts made by your employees.
To make charitable giving part of your company’s DNA, early-stage startups can work with such nonprofits as Pledge 1%. This organization encourages companies to give one percent of their product, revenue, and/or corporate time to charitable causes. Additional alternatives include sponsoring a special event, like a 5K race, donating products for a silent auction, or volunteering at charities alongside your employees.
Best practices for deductions
Speak to a financial professional or your accountant to assist with taking tax deductions for your donations because contributions qualify only under certain conditions. To deduct a donation, you must contribute to eligible charities, which generally are registered as 501(c)(3)s with the Internal Revenue Service. Typical IRS-sanctioned donations include cash, volunteered services, sponsorship of a charity event, or the donation of inventory or services, but each category has limitations. For example, while you’re not allowed to deduct the value of your volunteered service, you can deduct supplies and other expenses incurred.5 And keep records, ideally for seven years, in case of an audit, including a written statement from any organization to which the company has donated.6
Ultimately, if done with thought and care, small business owners who give to charities can reap business, financial, and personal rewards — benefiting the community, employees, and themselves.
Learn more about how Guardian’s corporate giving program Guardian for Good helped raise funds for Bike MS, as an idea to consider as you look to discover what can work for your company.