Abiola Abdulkareem has extensive knowledge of the legality of organizations. A history of providing legal assistance has helped Abiola Abdulkareem help law firms. Starting a foundation can be confusing for those who are unfamiliar with all the necessary steps.
What Constitutes A Foundation?
A private foundation is technically an independent entity to support charitable causes. A public charity needs fundraising to sustain itself, whereas a private foundation does not. Individuals, including family, can support private foundations.
Private foundations can benefit several groups of people. Foundations have been formed to support education, children in need, and various medical innovations. Creating a foundation can help raise awareness as well as funding for charitable causes.
Specific legal issues pertain to private foundations. For instance, foundations are considered tax-exempt since the financial support comes from a donor, the founder controls who is included on the board and where the funds are invested.
3 Benefits of Starting A Foundation
There are several benefits in addition to supporting a charitable cause. Starting a foundation can build a positive structure to pass on to future children. It can also create a philanthropic society.
Tax Deduction
A foundation can reduce income tax for each year the founder contributes. Depending on what’s donated to the foundation, capital gains taxes may also be avoidable. Tax-advantaged growth can increase the assets in a foundation to provide extra support.
Hire Family
Hiring family members to work in the foundation can help reimburse expenses related to the foundation. In addition to the financial benefits, this has the potential to create a family legacy. This can be a valuable learning experience if the foundation is started while children are still young.
Create Grants
Grants are one way to form charitable support through a private foundation. Grants can be given to disaster relief victims and those who are negatively impacted by the economy. Scholarships and award programs are also possible.
Where To Start
Abiola Abdulkareem
and other legal experts understand the steps necessary to create a foundation. While it may seem daunting at first, the process does not have to take long.
Naming A Foundation
Naming a foundation is relatively straightforward. There is no obligation to name a foundation after a family name or historical title. Many people use a generic name that explains the organization’s purpose, but it is not mandatory.
Filing The Organization
A foundation must be legally identified. This is usually best accomplished with a legal expert that can sort out all the possible options. An organization can be set up as a charitable trust or a 501(c)3. Since each state has its requirements, research is recommended before filing with the IRS.
Board Selection
Bylaws are necessary when starting an organization. The founder can select the governance of an organization. Scheduled meetings will help all members understand the status of the organization when making decisions. Policies will help reduce conflict of interest and benefit all members when presented early in the process.
Set Criteria
A foundation’s criteria should be clearly understood from the beginning. Expectations should be discussed when it comes to grants and programs. Specific criteria outline who is entitled to grants as well as the necessary timeline for certain programs. Knowing where money is spent is crucial to any organization.
Create A Plan
A foundation’s plan must be financially sustainable. This will most likely require fundraising efforts. This can include dinners and custom events throughout the year or on an annual basis. Raising money can happen on a personal basis. Sending emails or making phone calls to friends and family may be enough to support a private organization.
Manage Funds
An individual employer number can help founders separate their business and the foundation. By receiving one individual employer identification number for each entity, both funds will not merge. This is particularly helpful when sorting financial records for the future.
Start Giving
A specific amount of money is not needed to start funding the foundation. Modest sums will make a difference in the long run. The responsibility of running a successful foundation is similar to running any business. Record keeping and filing tax returns are expected as well as successfully managing employees. If a foundation is created with the intent to operate in perpetuity, giving can continue indefinitely.
Solicitation Laws
require organizations to register with a state-run agency. Soliciting contributions without registering can have legal consequences depending on the location. Private organizations are advised to file reports to avoid potential legal issues, including an IRS Form 990-PF. This can be a multi-step process, and legal expertise is recommended.
Philanthropy vs. Charity
A private organization is beneficial for long-term giving. A philanthropist must be engaged and enthusiastic to run a private foundation. The work that is required to run an organization is more in-depth than giving to public charities.
Charity can be given on a one-time basis. Writing a check to a charity cause or public volunteering requires less commitment than starting a foundation. Because it takes ongoing dedication and financial expertise, this process is best for passionate individuals.
Helping people through a private organization can change lives. Providing scholarships and grants often benefit research institutions. Starting a foundation is one way to both save and give money.
