Foundation Formation

Please note as we do not have any hidden fees or service costs with any of our services that there is an additional cost of $275 for filing the forms with the IRS post filing. Instructions of course are provided. Please note this is not a cost that we set, rather one that is set by the IRS.

BENEFITS OF A FOUNDATION

Here are a few of the unique benefits of this powerful, flexible giving vehicle:

• Run charitable programs without setting up a separate nonprofit
• Retain full legal control over foundation governance, assets, and spending
• Make tax-deductible grants directly to individuals in need
• Hire family members and reimburse foundation-related expenses
• Get a current-year tax deduction, but give when you feel like it
• Create a lasting legacy that links the family name with good works
• Pass on values and skills to younger generations
• A business trust can give up to 100% of its profits to a foundation and not show any profits.

Private Foundations are typically funded by a single individual, family or business. However, you don’t have to be Bill Gates rich to establish your own foundation. There are over 91,000 private foundations in existence today the majority with assets under $1 million ( according to IRS data).

Private foundations are:

• Independent legal entities
• Organized exclusively for charitable, educational, religious, scientific or literary purposes
• Controlled and funded  by a single individual, family or business (not generally public fundraising)

Contributions to the foundation are tax deductible. Note that foundations are required to pay out 5% of their previous year’s net average assets each year in qualifying distributions, which include charitable donations as well as certain administrative expenses.

FUNDING AND INVESTMENT OPTIONS

Private Foundations are typically funded by a single individual, family, or business. They can be funded with, and continue to hold, a wide variety of assets. Other giving vehicles typically liquidate any assets that aren’t publicly traded securities shortly after funding.

Assets that can be held in a private foundation include:

• Real estate
• Cash and publicly traded securities
• Tangible assets (art, jewelry, collectibles)
• Intangible personal property (copyrights, patents, royalties)
• Alternative assets, including private equity
• Life insurance and annuities

If you have a Charitable Remainder Trust, you can usually name your foundation as the beneficiary.

GIVING OPTIONS

Private foundations have broad latitude to pursue any activities as long as it advances their charitable purpose.

In addition to supporting public charities and other types of nonprofit organizations, a foundation can:

• Set up scholarship and award programs, and choose the recipients
• Make grants to individuals for disaster relief and economic hardship
• Provide loans that are repaid to the foundation
• Provide funds to for-profit companies, as long as they’re used for a charitable purpose
• Run its own charitable programs, such as a coat drive or soup kitchen
• Grant directly to international organizations

Foundation 501(c)(3) vs 508(c)(1)(a)

• A 501(c)(3) can receive tax exemption at the register, a 508(c)(1)(a) although respected as its own legal entity usually can not.
• Contributions to a 501(c)(3) are tax deductible for the donors. This is not always true of a 508(c)(1)(a).
• A 501(c)(3) can donate to a  508(c)(1)(a) thereby allowing the donors to receive the tax benefits and the 508(c)(1)(a) to still prosper while maintaining its status as a 508(c)(1)(a).