There are a number of charities and foundations out there who fund a variety of programs. But what if you’ve heard of someone who’s fighting a great cause, but has no grant-writing organizations willing to fund them?

You may consider creating your own foundation to support that group and others you are familiar with that need the assistance. But where do you start?

We’ve created a basic collection of information and “how to” below will help you on your journey.

What is a Foundation?

A foundation, whether a private foundation or public charity, is a non-governmental entity that uses gives grants or funds to nonprofit organizations, groups, or individuals that don’t directly work for the foundation.

Types of Foundations

There are two basic types of foundations: charitable public grant writing foundations, and private foundations.

Charitable Grant-Writing Foundations

A charitable foundation is a type of nonprofit organization that typically uses its resources to support either its own charitable purposes or creating grants. Public foundations often provide funding to charities like:

  • Hospitals
  • Churches
  • Schools
  • Colleges
  • Universities
  • Qualified medical programs

Private Foundations

A private foundation is different in that it is usually funded by a family or small group of philanthropists who wish to pool resources and use those resources to fund specific charitable organizations.

Private foundations are often groups that set up scholarships or grants for very specific groups, rather than the broader possibilities found in public foundation funding.

Non Profit vs Not for Profit: What’s the Difference?

After you understand the difference between types of foundations, you’ll need to ask, “what’s the difference between a nonprofit and a not-for-profit organization?”

There are a few differences between the two, but the primary difference in not for profit vs nonprofit organizations are:

  • A not for profit organization is one that retains the income produced through donations for using to fulfill organizational obligations. This type of foundation has a much narrower purview of how they disperse their funds.
  • A non-profit organization specifically works to promote a charitable work, art fund, scientific research, or other charity-based purpose. Non profit organizations have a broader scope of potential recipients.

How to Start a Charity Foundation

Here are a few basic steps on how to start a foundation.

1. Define Your Purpose

The first thing you’ll need to do as you form your foundation is understand and define your organization’s purpose. Will you be seeking funding for the arts and culture, for those in physical need, or for medical purposes? Think through the groups you’ve most supported in the past, or, if you have a new purpose, such as supporting a cause that you’ve now been privy to the need of, and start there.

2. Decide: Trust Versus Nonprofit Corporation

Both charitable trusts and nonprofit corporations have guidelines, regulations, and laws that they must follow in order to receive donations and write grants legally. Look into the differences and understand which is more suitable for your purposes.

3. Understand the Legal Implications and Taxes

You’ll also need to understand how taxes work for any type of foundation you’ll be forming. It’s critical you do this research before beginning the process, as it will impact the way you run the corporation or trust from the beginning.

4. Create Your Foundation’s By-Laws

While creating by-laws isn’t a required step, it is highly recommended. Using a system like Roberts Rules of Order can help to keep your organization running smoothly through times of turmoil that may lie ahead.

5. Apply for Your Foundation’s EIN

You’ll need to have an employer identification number, or EIN, for your foundation to legally succeed. This number works for a corporation or foundation like a social security number does for an individual.

6. File All the Paperwork

The long, arduous task of filling out and filing the proper paperwork is required before your foundation can receive tax exemption status. You’ll want to hire a professional to do this for you, unless you happen to have significant knowledge of tax laws and foundation regulations.

7. Do the Fundraising

Once all of the other steps have taken place, and you’ve been approved by the IRS as an official nonprofit grant writing organization, you’ll need to actually do the fundraising.

There are a host of ideas and tools for nonprofit fundraising, including entire companies dedicated to helping groups like your new foundation raise funds through galas, banquets, or other fun events that will draw the crowd most likely to donate to your causes.

Now You’re Ready to Form Your Own Foundation

Now you’re ready to begin the process of forming your own foundation. Remember to investigate the legal implications that apply to taxes, as well as about the people and groups your foundation will be able to help. Hire a lawyer to assist with crafting your organization’s by-laws, and keep in mind the various options for non profit fundraising projects and events you’ll need to begin once your foundation has been approved by the government as a legitimate nonprofit foundation.

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