There is an amazing amount of how-to articles available on the Internet about starting a charitable foundation. Many are free, but some charge a fee to use their resources. The ones that charge generally deal with the legal aspect. This article provides some of the basic things you need to know when considering building a charitable foundation. There is also a link to the IRS online resources, which may prove helpful.
What is a Charitable Foundation?
The purpose of a charitable foundation must be to benefit public interest basically, but the various types of foundations can be markedly different. A foundation (public charity) typically relies on money from government grants as well as from individual donations and the private sector.
Some charitable foundations focus on altruistic objectives like education or religion, which serve the common good of the public and raise awareness specifically. The sky is the limit really and the type of charitable foundation is generally based on a person’s passion.
IRS Forms 1023 or 1024
Most charitable foundations raise money by fund raising or through the acquisition of grants. Unless you have filed the proper forms with the IRS first, though, it is illegal to conduct business or be the recipient of any type of grant funding.
You must file a tax-exempt Form 1023 or 1024 with the IRS, which the IRS will have to approve. This can take quite a bit of time, so be prepared for a wait – sometimes up to a year. The IRS is extremely particular about these forms and if you file incorrectly, you will have to start the entire process over. A printable 1023 and 1024 form is available online here.
Laws Differ from State to State
The regulation surrounding a charitable foundation will differ from state to state. The law in your state will determine what requirements and process you need to follow to form a charitable foundation. Log onto your state government website for information. In addition to state regulations, the IRS determines federal tax relief standards.
What will the IRS Expect?
A couple things the IRS will be looking at when determining a tax-exempt status charitable organization include the organization set up as a corporation or trust, or an unincorporated association. These are important things to consider carefully and may warrant the need for legal advisement.
Studying the IRS Forms 1023 and 1024 online, you will specifically know what you will need to get through this step of forming a charitable foundation. Studying the forms beforehand will likely save a lot of aggravation when applying to the IRS.
Things to Research
Before you can launch a charitable foundation, there is a ton of research to do. A good place to start is government and tax matters, financial issues, fund raising and advocacy. Being up to date on technology is critical because much of a charitable foundations promotion takes place today on the Internet.
Marketing and the media will be a major factor in building a successful charitable foundation. Brushing up on this aspect will put you ahead of the game.