Setting Up A Charitable Foundation

Once setting up a charitable foundation was a very complicated operation, involving trustees, layers and it seemed that only those who were in a high income bracket could enjoy the tax benefits and prestige that the foundations could offer. However times have changed and anyone with a will and a way can establish their own charitable foundation and experience the joy of giving, which is financed, at least partially, by the IRS.

A nonprofit organization, which can be for charitable purposes only, can be established by an individual, a group of friends, colleagues at work or members of a religious community a social club or any want who wants to help those less fortunate. Anyone falling into this category can incorporate as a nonprofit organization. They need to do so to establish their own bank account or own some property. In a case of an individual, by establishing a charitable organization, they clear the way for the organization to continue in perpetuity after their passing.

The advantages of establishing a nonprofit organization for those who are involved in setting up a charitable foundation are that by being designated as a non profit making charitable organization, will allow foundations to be exempt from all forms of taxation.

On the outset, many people who are in the stages of establishing a charitable organization may opt to link with an existing nonprofit organization. This will help the new foundation to offset some of its fixed costs, as well as gaining some valuable practical experience in administering the foundation. They may also be able offer assistance in the incorporation and give valuable advice on the issues of tax exemptions and deductibility.

At some stage the foundation will have to recruit the services of a lawyer to handle some of the more complex issues. However by taking full advantage of the being involved with an established charitable organization will certainly defray many of the legal costs involved, especially during incorporation.

Charitable foundations are one of the few legal entities are that can be incorporated solely as a nonprofit making organization. Whilst the body or bodies involved in the setting up a charitable foundation may have the best of honorable intentions, the fact that the fund has been incorporated protects the trustees and officers from any personal liability in the event of unforeseen circumstances.

Once moneys or assets have been donated to a nonprofit organisation or charity, this donation is legally final and irrevocable and can only be re-donated to another charity in the event that the foundation is wound up.

Once all these issues have been settled, then the foundation's lawyers will be called in to draw up a mission statement for the foundation. Depending on the intended size and scope of the foundation's activities, the lawyers will have to provide a list of criteria on which the fund will operate. These facts have to be clearly defined in order to meet with the tax authority's specifications.

As soon as all these issues have been settled then the charitable association can be officially established. The association should have a name, which can be of the individual who established the foundation, his family name of the name of his business. Also religious communities and associations such as spots clubs can form foundations. The object of this type of foundation generally is to further the goals of the community of association that they are members of. Any of the funds and assets that the association has at their disposal is then free to be distributed as the trustees see fit.