Can an LLC Make Charitable Contributions?

by Jeffrey Joyner

Each state establishes its own rules for the formation of limited liability companies, and an LLC is not a recognized business structure for federal income tax purposes. The Internal Revenue Service requires LLCs to file as a partnership, a corporation or an S corporation. An LLC can make charitable contributions as long as the beneficiary qualifies under IRS regulations and the LLC accounts properly for the donations.

Qualified Beneficiaries

Charitable contributions must be made to qualified nonprofit organizations. The IRS defines qualified organizations as those that have a charitable, scientific, religious, literary or educational function, or that work to prevent cruelty to animals or children. Donations to a local, state or federal government qualify if the gift is for the public good. Agencies such as the American Red Cross, United Way, Boy Scouts, Goodwill and similar groups also qualify, as do veterans’ organizations, nonprofit hospitals and nonprofit schools. Donations must be made to an organization rather than to an individual.


The IRS doesn't allow deductions for charitable contributions made to communist organizations. Civic groups, labor unions, political organizations or candidates, chambers of commerce, social clubs, lobbyists for legal reform and similar groups also don't qualify. With few exceptions, the recipient must be a U.S. organization providing charitable services in the United States. Mexican, Canadian or Israeli charities might qualify if the donor has income from that country and the organization would qualify as a charitable group under IRS regulations had it been founded in the United States. Donations to a qualified organization can't specify an individual to benefit from the donation. The donor cannot receive any goods or services in return. If the contribution includes a benefit, such as tickets to a dance or some other event, only the amount of the donation that exceeds the fair market value of the benefit is deductible.

Type of Contributions

Charitable contributions may be in cash, intellectual property, real estate, tangible property or inventory. To deduct a donation of inventory, the goods must have been included in inventory during a previous year. The value of the donated inventory must be removed from opening inventory in the year in which the donation is made and excluded from cost-of-goods sold. Noncash donations exceeding $5,000 typically require a written appraisal from a bona fide appraiser.

Accounting for Contributions

If an LLC is taxed as a corporation, it cannot deduct charitable contributions as a business expense. Instead, donations must be deducted separately on IRS Form 1120. Partnerships and S corporations are pass-through entities, meaning all profits or losses are passed to the shareholders, who report them on their personal income tax returns. Partnerships and S corporations list charitable contributions on the Schedule K-1 forms that they must issue all shareholders at year-end. The shareholders use their K-1 forms to complete their personal tax returns. Regardless of filing status chosen, the LLC must file an IRS Form 8283 for all noncash contributions exceeding $500. Partnerships and S corporations must furnish a copy to each shareholder affected by the contribution.

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