The best investment a company can make is in its community, according to Joseph B. Baldasare, vice president of development for The Dayton Foundation. “For a small business to succeed in its community, it should have a vested interest in the future of that community,” he said. “That often includes making gifts to the not-for-profit organizations that enhance the quality of life for its citizens.”

Baldasare said he encourages business owners to consider opening a charitable fund, especially through community foundations such as The Dayton Foundation. They have the staff expertise to manage and streamline the charitable giving process, including verifying the IRS charitable status of the company’s chosen charities.

There are four reasons to use a foundation, according to Baldasare.

“First, a charitable fund enables a small business owner to establish a budget for charitable giving,” he said. “Let’s say that a company experiences a good financial year. By moving some of its revenue to a charitable fund, the company can make gifts to charity throughout the year or in future years when revenue is not as high. Secondly, a charitable fund through a community foundation can help the business maintain a historical record of the company’s charitable activities. This is especially useful come tax time.”

Charitable funds also help business owners involve their staff in charitable giving. This helps the company give something back to the community, said Baldasare.

“Another way business owners have used their funds is as a means of helping employees participate in the companies’ charitable activities,” said Baldasare. “For example, employees can pay a minimal amount to dress causally on Fridays which gets put into the charitable fund. As the dollars in the fund grow, the employees can be involved in making charitable distributions to the charities of their choice.”

Finally, said Baldasare, since community foundations are locally run, not-for-profit organizations, the business may claim a charitable deduction for gifts into their charitable fund in the year the gift is made. “Gifts to an endowed fund that is invested over time add to this source of permanent community capital helping to do good work in the community forever.”

Working with a foundation also can have a direct benefit to business owners. “Community foundation funds also can be very helpful when an individual is looking to sell his or her business or to contribute closely held stock,” said Baldasare. “The stock can be contributed outright to a foundation fund, entitling the donor to a deduction for the appraised fair market value, up to 30 percent of the individual’s adjusted gross income.” Baldasare added that special rules apply to shares of sub-chapter S corporation stock.

He said the foundations have the unique ability to accept a variety of assets, including gifts of cash, appreciated securities, retirement funds, real state, limited partnerships, and family limited partnerships.

“Donations such as those require care, consideration and planning and the involvement of the business owner and his or her financial advisor, as well as a representative from the community foundation,” he said.