An Intro to Giving as a Small Business: Donations & Gift Matching

Small business owners wear a lot of hats. Between acting as the CEO, CFO, chief marketing officer, chairman of the board, and chief bottle washer, you may think that CSR (corporate social responsibility) programs are out of reach for your company.

The opposite is true: thanks to modern CSR software and flexible giving options, small business donations are easier than ever to implement. And, with the right tools and tactics, you can even take things a step further than traditional donations. Below, we explore different options for small business donations and CSR activities that you can implement with the help of Groundswell. 

Table of Contents:

• Why Giving Matters for Small Businesses
• What to Know About Charitable Giving & CSR for Small Businesses
• Option #1: Charitable Donations
• Option #2: Gifting & Matching Programs
• Option #3: Employee Donor-Advised Funds (DAFs)
• FAQs About Small Business Donations & Giving
• Groundswell Powers Corporate Giving Without the Complexity

Why Giving Matters for Small Businesses

When your profit margins are tight, as is common with smaller businesses, what’s the reason to spend more on “extracurricular” programs like gift giving and matching?

Simply put, study after study confirms that businesses that invest in CSR programs exert advantages over their competition. 

• Companies with CSR programs experience 35% less employee turnover than other companies, which saves on interviewing and onboarding expenses
• Nearly half of consumers consider a company’s CSR practices before purchasing a product or service
• 76% of executives say that having CSR programs improves their brand reputation

Small businesses also benefit from corporate giving and other CSR programs because they generally have stronger connections with their communities. Gifts to nonprofits may have double the goodwill impact, for instance, if people associated with the nonprofits regularly pass by your company’s physical location. 

What to Know About Charitable Giving & CSR for Small Businesses

Back before businesses had multiple ways to donate, large enterprises were the only ones with the resources to engage in corporate giving. Fortunately for your company, the days of corporate foundations dominating the CSR scene are in the past. 

Below are some smart ways to implement CSR for small business entities.

Option #1 for Giving as a Small Business: Charitable Donations

Cash donations remain the most common form of CSR for businesses. The relative simplicity of cutting a check, notifying accounting, and deducting the amount from your taxes is hard to resist. 

Besides cash, charitable donations could come in the form of:

• Company stock
• In-kind product donations
• Pro bono services

Pros: Donations are easy and quick, and administrative tasks are relatively few.

Cons: Small businesses might not have many tangible assets to donate, which can limit their CSR impact.

Option #2 for Giving as a Small Business: Gifting & Matching Programs

Another giving option for small businesses is matching employee donations. Businesses often do this for a limited time or up to a certain limit. Donation matching is not always necessary, but it can be a good way to maximize employee participation in CSR. 

You can make giving more convenient for your employees by allowing payroll to withhold a portion of their paychecks.

Pros: Donation matching can generate employee interest and boost the ROI of your CSR programs. 

Cons: Employee donation matching is not a silver bullet for employee engagement—you still need to ensure workers have access to causes they care about. Additionally, gifting and matching programs can create a significant amount of administrative work.

Option #3 for Giving as a Small Business: Employee Donor-Advised Funds (DAFs)

For years, donor-advised funds (DAFs) have been one of the most powerful tools used by wealthy individuals to manage their giving—offering immediate tax benefits while allowing donations to grow over time. But that kind of flexibility doesn’t have to be limited to the ultra-wealthy.

With employee donor-advised funds, companies can give employees the same advantages: the ability to take a tax deduction now, while deciding where and when to direct their impact. Instead of needing to choose a nonprofit immediately, employees can contribute assets, let them appreciate, and make more thoughtful, potentially larger donations down the line.

Pros: Employees gain more control and flexibility over their giving, along with immediate tax benefits. Over time, nonprofits can receive larger, more impactful donations.

Cons: Funds may not reach nonprofits right away, and some employees may need guidance to fully understand and take advantage of how DAFs work.

FAQs About Small Business Donations & Giving

Small business owners and HR representatives often have similar questions about corporate giving programs. Here are some quick answers to a few of those questions.

Can a small business deduct charitable donations?

Yes, a small business can deduct charitable donations from its taxable income. The precise method for doing so depends on the structure of your business; pass-through entities, such as sole proprietorships, usually have deductions reported on owners’ personal returns. C corporations deduct charitable donations on corporate returns.

The IRS sets limits on the amounts businesses can deduct. For personal tax returns, the limit is 60% of your adjusted gross income (AGI). The limit on corporate returns is 10% (with a floor of 1%), but corporations can carry over excess amounts for up to 5 years. Consult a tax expert for more information.

How much should a small business donate to charity?

The amount your small business should donate to charity depends on many factors—your account balances, the company’s industry, and your CSR (corporate social responsibility) goals. Small business owners often start with a percentage of profits or a small, fixed amount. The Pledge 1% movement, for example, can help your business lay a solid foundation for corporate giving.

What is the maximum donation write-off for the IRS?

The IRS allows individual taxpayers to deduct charitable contributions totaling up to 60% of their adjusted gross income (AGI). Corporations are subject to a lower threshold of 10% if they’re sticking with cash donations. However, C corporations can carry over donation amounts over 10% for up to five years after the initial donation.

The limit for appreciated stock is typically 30% of the corporation’s AGI. The IRS has strict rules on itemizing deductions versus taking business tax deductions. Because of the complexities of tax law, it’s best to have your business work with a certified public accountant.

How can a small business do CSR?

Small businesses can engage in CSR (corporate social responsibility) programs in many ways. Corporate giving, including employee-matching donations and corporate grants, is a relatively simple way for small businesses to get into the CSR game. 

Apart from donations, small businesses can set up volunteering initiatives for their employees. A good way to increase participation in CSR programs is to offer incentives, such as paid time off for volunteering days.

Groundswell Powers Corporate Giving Without the Complexity

A big problem that small businesses have with some of the legacy CSR software providers is that the products are too complicated to implement and too expensive for smaller budgets.

The staff at Groundswell noticed this issue years ago and decided to do something about it. We came up with an intuitive, affordable CSR platform that provides clients with all the capabilities they need. It works out of the box, so your company doesn’t have to spend weeks or months onboarding the software.

With Groundswell, your small business can engage in:

• Corporate giving (including stocks and other non-cash assets)
• Donor-advised funds (DAFs)
• Employee emergency assistance funds (EAFs)
• Corporate grant making
• Donation matching
• Employee volunteering

Because our platform instantly matches employee donations and sends funds to charities within 24 hours, the administrative load is far less than you’d get with other software providers. We’ll even provide you with a list of vetted nonprofits.

See What Your Small Business Can Do with Groundswell

The democratization of CSR is here, and Groundswell is leading the way. Although your business may be small, it can make a huge impact on your community. 

The next step is scheduling a quick, personalized demo with our team.