Should you start a nonprofit or a foundation?

Hey Socialife Tribe!

If you’ve ever considered starting a foundation or a nonprofit but aren’t sure which one you should start.  This is the video for you!

One thing to keep in mind is that all charities are nonprofits even foundations but all nonprofits are not charities. The reason this is important is because some nonprofits are not created for public benefit but all charities (in order to be deemed a charity) must be for public benefit.

Often times if your for purpose organization does not qualify as public benefit some organizations will go the foundation route.

If you are considering some of the main differences or just to get a better understanding of what a foundation is and whether or not you should list yourself as one or even use it in the name, here you go! If you’re considering starting your own nonprofit check out my 7 steps here.

The main points

  1. Foundations are typically funded by individuals or corporations.
  2. Foundations are required to pay out 5% of their net assets from the previous year.
  3. Foundations can run charitable programs w/o setting up a nonprofit.
  4. Foundations can set up scholarships and award programs and choose the recipients.
  5. Foundations provide funds to for profit companies as long as they are used for charitable purposes.
  6. Foundations and nonprofits must go through the same process to get started.
  7. The word foundation has no legal meaning

There are two types of Foundations: Operating and Non-operating.

  1. Private Non-Operating Foundations: 
  • most common foundations (Bill and Melinda Gates, Large corporations)
  • do not directly perform services or programs
  • provides grants to other nonprofits

2. Private Operating Foundations

  • distinguishes its funds to its own programs or services for charitable purposes
  • can provide grants to other nonprofits
  • can be run very similar to a nonprofit

Requirements

  • All Foundations are required to distribute about 5% of their net assets from the previous year.
  • Cannot do business with major contributors

 

 

Sources: https://cullinanelaw.com/difference-between-public-charity-and-private-foundation/

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