How to Set Up a Charitable Foundation
According to the National Heritage Foundation, a charitable foundation is "a legal categorization of nonprofit organizations that either donate funds and support to other organizations (public), or provide the sole source of funding for their own activities (private)." As you seek to set up your own charitable foundation, plan carefully to produce the most good for your money. Consider obtaining legal and financial counsel before you start your foundation. Be aware that "foundation" is not a legal term indicating that an organization gives grants. There are several routes to providing charitable contributions.
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Instructions
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Start a private foundation. These are nonprofit organizations that give money to charities, but they are subject to much stricter tax and reporting requirements than are public charities. They cost more to set up and maintain as well. Contact your state's secretary of state and nonprofit association for information about setting up a private foundation as a nonprofit corporation or charitable trust. You will also need to register your organization with your state's department of revenue and the Internal Revenue Service, and possibly your state's attorney general.
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Start a public grant-making foundation. This is another type of nonprofit organization that gives grants. This type of organization has multiple sources of support, and it does not rely on one family or individual's money for its financial survival. Most community foundations are public grant-making foundations. Procedures to set up a public grant-making foundation will also begin by contacting your state's secretary of state to learn about its nonprofit organization filing and reporting requirements.
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Set up your foundation with a donor-advised fund, which is a "charitable giving vehicle wherein an individual, family or corporation makes an irrevocable, tax-deductible contribution of personal assets to a charity and at any time thereafter can recommend grant distributions to qualified charitable organizations," according to the Donor Advised Funds website. Donor-advised funds are much cheaper to set up and operate than private charitable foundations. Three of the larger fund companies offering donor-advised funds are the Fidelity Charitable Gift Fund, Vanguard Charitable Endowment Program and Schwab Fund for Charitable Giving. Donor-advised funds also take over much of the administrative requirements of a foundation.
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Tips & Warnings
Consider setting up a charitable fund through your local community foundation. These organizations deal with much of the everyday management of administrative and financial responsibilities.
References
Resources
- Photo Credit public funding issues image by Kelly Young from Fotolia.com
