I am creating a business where I provide consulting services to Fraternities and Sororities. I am setting up a non-profit where I would help them reduce costs associated with memberships in their prospective clubs and receive membership fees to manage. I would like to start them in businesses where I make them LLC's so that they all use the same tax ID. I would have them then gift all earnings to the Fraternity or Sorority associated with each LLC. The nature of the businesses being set up require membership forever but not necessarily participation.

My question is are the gifts tax free? I'm not attempting to avoid taxes but simply to make sure that once graduated each person involved has no more association with the business and do not have to worry about having their earnings from their participation in this taxed individually.

Feel free to poke holes in this and make suggestions to improve upon this system.

Thanks for your time

“My question is are the gifts tax free”---> Any business can make contributions to charitable organizations and can deduct cash contributions; if you are a sole proprietor, your business taxes are filed on Schedule C of your personal Form 1040. Your business cannot make separate charitable contributions because the only way individuals can deduct these contributions is on Schedule A, and you must itemize deductions to take them. The same would be true for a single-member limited liability company, since the single-member LLC files taxes as a sole proprietor. However, deductions for charitable contributions by members of a multiple-member limited liability company work the same as for a partnership. A partnership is a special case, because the partnership itself does not pay income taxes; the income and expenses (including deductions for charitable contributions) are passed along to the partners on their individual Schedule K-1 each year. So, if the partnership makes a charitable contribution, each partner takes a percentage share of the deduction on his/her personal tax return. For example, if the partnership has three equal partners and it donates a total of $2,100 to charity in 2010, the partners each can claim $700 of charitable deductions on 1040 Sch A line 16.