How to Start a Private Foundation

Foundation or public charity?

Both are 501(c)(3) organizations. The difference is where the support comes from and how the organization is controlled. A public charity draws support from a broad base of donors and the general public. A private foundation is typically funded by one source, an individual, a family, or a company, and often makes grants to other charitable organizations rather than running its own programs.

Because foundations are funded and controlled narrowly, the IRS applies closer oversight: an excise tax on net investment income, a minimum annual distribution requirement, and rules restricting self-dealing between the foundation and its substantial contributors. None of these are obstacles when you plan for them, but they do need to be understood before you commit.

Why founders choose a foundation

• Control. The donor and family can direct grantmaking and serve on the board.
• Longevity. A foundation can operate across generations, carrying a family's charitable intent forward.
• Flexibility in timing. Assets can be contributed now and granted out over time.
• A clear vehicle for a legacy. Naming, mission, and priorities are set by the founder.

How we help

We advise on entity choice, prepare the organizing documents and exemption application, and set up grantmaking and conflict policies so the foundation can operate confidently from year one. If a donor-advised fund or a public charity would serve your goals better, we'll tell you that too.