Achieve your charitable goals more effectively
The formation of a private foundation can be an effective way to achieve your charitable goals and establish a legacy while minimizing tax paid on your assets.
Private foundations are essentially personal charities organized like trusts.
As a nonprofit with funding coming from a sole source (an individual, group, or family) rather than through fundraising, they are highly regulated.
This makes them complex to set up and operate. It can be especially challenging for individuals with no experience in the field.
We help you:
- Understand your options
- Complete IRS Form 1023 – the application you file with the IRS to obtain tax exempt status under Section 501(c)(3)
- Set up your private foundation to best achieve your mission
- Secure the same tax benefits as other charitable organizations
- Arrange the necessary steps for compliance and good governance
Is a private foundation the right option?
Before you can decide on whether a private foundation is the correct option for you, we need to understand your main goals for setting it up.
High net-worth individuals often form foundations to achieve goals, such as:
- Helping the poor and disadvantaged
- Developing the sciences
- Developing the arts
- Improving education
- Developing religious awareness
- Benefiting healthcare
- Bettering international relations
Note that you are not permitted to set up a private foundation for political or lobbying causes.
We also need to understand who you want to be involved in running your private foundation: yourself only or family members or other individuals?
Another key area to understand is how you hope to fund the foundation.
What are the downsides of a private foundation?
If your foundation is set up and operated according to best practice and in line with your mission and goals, there are limited downsides.
However, private foundations can be complex to run and administer. Full awareness of the intricacies is required for a private foundation to avoid problems and run effectively.
For starters, private foundations have the most restrictive regulations of all charitable organizations detailed in the Internal Revenue Code.
You must follow this strict set of statutes or severe penalties can apply for your foundation and the family members involved.
You can also lose foundation status if you fail to comply with the statutes, even if it is done unwittingly (as is sometimes the case).
You must make grants to qualified charities of at least 5% of your private foundation’s holdings every year.
You must file a tax return (Form 990) for your private foundation every year.
Legal advice for the setup and operation of your foundation
The setup of a private foundation is an area for which there is no substitute for experienced advice.
We will help you with the key upfront decisions, as well as the ongoing complexities of operating your fund correctly.
- Setup of your foundation
- State filings for non-profit corporation
- Securing tax-exempt status from the IRS (income tax and estate tax)
- Advisory for compliance and governance
- Submitting the necessary documents to the IRS (Form 1023, schedules & attachments)
- Assistance with grant-making to appropriate organizations
- Legal advice on making prudent investments through the foundation
- Reviews of foundation operations for compliance purposes
Whether you are just starting out with your idea of forming a private foundation or you are well along the road and need some expert guidance or restructuring advice, we are here to help…
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