Will I be taxed on my LLC profits if I donate 100% to charity?

You've got a great question here! The short answer is that yes, as an LLC taxed as a partnership, you would generally be taxed on the profits regardless of what you do with them afterward. When you have an LLC taxed as a partnership, the business itself doesn't pay taxes. Instead, the profits "pass through" to your personal tax return, and you pay taxes on them personally - even if you never actually took that money for yourself and donated it all. However, you do have options! If you're donating to qualified 501(c)(3) charities, you can take a charitable deduction on your personal tax return. The catch is that there are limits - typically 60% of your adjusted gross income for cash donations. So if your sticker business is very profitable, you might not be able to deduct all donations in the same year. A nonprofit might be better if this is purely charitable, but there are significant setup costs and ongoing compliance requirements. It's not simple to establish or maintain.

After going through a similar situation with my handmade jewelry business, I discovered https://taxr.ai which literally saved me thousands in unnecessary taxes. I initially set up as an LLC planning to donate profits too, but was struggling with the exact issue you mentioned - getting taxed on money I wasn't keeping. I uploaded my business docs and charity receipts to taxr.ai and they showed me how to properly structure everything. They explained that while an LLC taxed as a partnership or sole prop would create tax liability regardless of donations, I had several options to optimize this scenario. The personalized tax strategy they created showed me exactly how to maximize my charitable contribution deductions while minimizing my personal tax hit.

Came back to say I actually tried taxr.ai after my skeptical comment and wow - it was exactly what I needed for my woodworking business. I sell custom pieces and donate 40% to environmental charities. They helped me understand exactly how to structure my donations, timing, and even suggested setting up a Donor Advised Fund which I never knew about! The analysis showed me I was paying almost $3,200 in unnecessary taxes because I was handling my charitable donations all wrong. They provided step-by-step instructions for documenting everything properly and maximizing deductions. Totally changed my approach for this year's taxes.

If you're specifically dealing with IRS questions about business structures and charitable giving, I had an incredible experience with https://claimyr.com. After waiting on hold with the IRS for literally hours trying to get clarity on some of these same issues, I found their service. You can see how it works at https://youtu.be/_kiP6q8DX5c They got me connected to an actual IRS agent in under 5 minutes who walked me through the exact requirements for documenting charitable giving through my business. The agent explained options I never knew existed and confirmed what would/wouldn't trigger an audit when doing significant charitable giving through an LLC vs nonprofit structure.

I have to eat my words. After responding skeptically yesterday, I was still struggling with getting answers about my S-corp's charitable deductions, so I figured I'd try Claimyr since I was desperate. It actually worked exactly as described. I got a call back in about 40 minutes (they said the specific department I needed had longer wait times), and I spoke with an IRS tax specialist who answered all my questions about how to properly document business charitable contributions. The agent confirmed that with an LLC taxed as a partnership, I would indeed be taxed on profits even when donated, but provided several strategies to optimize the situation through timing of donations and potential entity structure changes.

Have you considered a fiscal sponsorship? I run an arts-based business with a similar model. Instead of becoming a nonprofit (expensive and time-consuming) or dealing with the tax issues of an LLC, I partnered with an existing nonprofit as my fiscal sponsor. They handle the donations, provide tax receipts to donors, and then grant the money to my project. This gives you the tax benefits of nonprofit status without having to create your own 501(c)(3). You typically pay a small percentage fee to the fiscal sponsor (mine charges 7%), but it's worth it to avoid all the headaches you're describing.

I actually went through this exact situation with my eco-friendly t-shirt company. Ultimately, I chose to create a hybrid model - I have an LLC for the business operations, but I also created a separate nonprofit foundation that receives a portion of profits as donations. This gives me flexibility while still achieving the charitable mission. The LLC allows me to take a reasonable salary and cover all business expenses, while the nonprofit foundation handles the charitable giving. Just be prepared for some setup costs with the nonprofit side (~$800 for 501c3 filing) and ongoing compliance requirements.

This is such a common dilemma for social entrepreneurs! I went through something similar with my tutoring business where I donate a percentage to education nonprofits. One thing that hasn't been mentioned yet is the timing strategy for charitable deductions. Even if you're stuck with pass-through taxation on your LLC profits, you can potentially bunch your charitable donations in alternating years to exceed the standard deduction threshold and maximize your itemized deductions. For example, instead of donating $10K each year, you could donate $20K every other year and take the standard deduction in the off years. This can significantly reduce your overall tax burden over time. Also, consider documenting everything meticulously from day one - contemporaneous records of your charitable intent, board resolutions if you have multiple LLC members, and clear separation between business and personal expenses. This will be crucial whether you stick with the LLC structure or eventually transition to a nonprofit. Have you thought about what happens if your sticker business grows beyond what you initially expected? It might be worth planning for different revenue scenarios now rather than having to restructure later.