Benefits of Setting Up a Private Foundation

Setting Up a Private Foundation

Have you ever considered setting up a private foundation? A private charitable foundation is essentially a 501(c)(3) charity that is exempt from federal income taxes. It is similar to any other non profit charitable organization, such as a church, school or medical research organization.

Funding

A 501(c)(3) organization can be classified as either a private foundation or a public charity. The main difference between a private foundation and a public charity has to do with the amount of funding and involvement in the organization. A private foundation would derive most of its financial support from a smaller number of individuals, such as the members of a family or other small group of private donors. A public charity would generally derive most of its support from the general public.

Benefits of a Private Foundation

In addition to the tax advantages, a private foundation can be a way to establish a family legacy of giving to others. Once set up, a private foundation can be a tremendous way for a family or other small group to benefit others for many generations.

Another benefit of setting up a private foundation is control. When you donate to a public charity, you have no control over the money you give or the operations of the foundation. On the other hand, a private foundation can be controlled by members of one family or a small group of individuals. The founder of the organization can pursue his or her own philanthropic goals by managing the assets and administering the grants. The founder can also get his or her family involved in the organization. Family members who help run the foundation can receive a salary and many other benefits.

Rules

A private foundation can be very rewarding and offer many benefits but there is a body of rules that must be followed. There is also a certain amount of administrative work that must be done on a regular basis. As such, a private foundation is best for those who can easily integrate it into their life because it relates to something they are already passionate about.