A private foundation may be an appropriate option if you want to make a lasting impact on a specific cause, involve your family or a small group of individuals in your philanthropy, and enjoy greater control and decision-making power over your activities.
However, it’s important to carefully consider the responsibilities and requirements associated with establishing and running a private foundation.
When would I need a private foundation?
You may consider establishing a private foundation if:
- You have a passion for a specific cause or issue and want to make a lasting impact.
- You want to involve your family or a small group of individuals in your philanthropic activities.
- You want to pool your resources and leverage your influence to support causes that align with your values and beliefs.
- You want to create a legacy by supporting causes and organizations that will continue your work long after you are gone.
- You want greater control and decision-making power over your philanthropic activities, including the selection and support of specific organizations and initiatives.
- You have a significant amount of financial resources and want to utilize these resources in a tax-efficient manner.
- You want to support innovative solutions to social and environmental problems that might not be possible through other types of philanthropic vehicles.
How to establish a private foundation.
Here are the steps to establish a private foundation.
- Identify your philanthropic goals and objectives: Determine the cause or issue you want to support, and determine your specific goals and objectives for your philanthropic activities.
- Choose a name for your foundation: Choose a name for your foundation that accurately reflects your goals and mission.
- Obtain tax-exempt status: Apply for tax-exempt status from the Internal Revenue Service (IRS) by filing Form 1023 or 1023-EZ. You will need to demonstrate that your foundation is organized and operated exclusively for charitable purposes.
- Create a governing document: Draft the articles of incorporation and bylaws for your foundation, which will set forth its purpose, governance structure, and rules for operation.
- Establish a board of directors: Appoint a board of directors to oversee the operations of your foundation and to make decisions about its activities.
- Fund your foundation: Make an initial contribution to your foundation, which will serve as the basis for its operations.
- Develop and implement policies: Develop policies and procedures for your foundation, including those for grantmaking, investment, and reporting.
- Begin your philanthropic activities: Begin your philanthropic activities, including making grants, supporting organizations, and pursuing your specific goals and objectives.
- Comply with ongoing reporting requirements: File an annual tax return (Form 990) with the IRS and comply with any other ongoing reporting and regulatory requirements.
In summary, establishing a private foundation involves identifying your philanthropic goals and objectives, obtaining tax-exempt status, creating a governing document, funding your foundation, and complying with ongoing reporting requirements. With careful planning and effective management, a private foundation can be an effective tool for making a lasting impact on the causes and issues you care about.
We can help you with the planning phases of establishing a foundation. Give us a call and let’s work together to help you meet your goals.
You Might Also Like