Archive for the ‘Uncategorized’ category

When And How To Establish A Foundation

April 7th, 2021

Private foundations may help you achieve your philanthropic goals, but while they can prove deeply rewarding, they can also be time-consuming, expensive and complex.

A private foundation is a not-for-profit entity that is run by a single individual, family or business (in contrast to a public charity). It must be operated exclusively for purposes that the Internal Revenue Service deems appropriate for a charitable entity, such as educational and scientific purposes or prevention of cruelty to animals or children. Many, but not all, private foundations support their cause or causes of choice by making grants to existing public charities.

Several key characteristics of private foundations may make establishing one the most attractive option for a given donor:

Control. A private foundation puts more control in the hands of the person or group that creates it than do most other forms of charitable giving. When the foundation is established, the donor or donors specify its purpose and often take an active part in drafting the bylaws that govern how and when grants are made. The foundation’s directors will often include donors and their family members. That board will determine the specific beneficiaries of the foundation’s gifts. In many cases, the board will also determine the investment policy governing the foundation’s assets.

Tax advantages. When donors give to a private foundation, whether at the time it is established or later, they receive income tax deductions, subject to certain percentage limitations relative to adjusted gross income. That makes this a powerful estate-planning tool, because estate tax deductions for bequests to a foundation are unlimited. And once the foundation invests its contributions, the assets grow tax-free.

Flexibility. Given the extended time horizon for most foundations, their focus on an objective rather than a particular organization allows them to adapt as individual charities come and go. Since distributions are made in accordance with the foundation’s mission, there is no need for those who establish it to select particular beneficiaries. Instead, the board of directors can determine which recipients qualify at any given time.

Family involvement. Foundations often bear the names of the people or families who founded them, and this is not coincidental. Many donors are drawn to private foundations specifically because they can be used to encourage their families to become involved in their philanthropic work. Foundations can provide employment to adult children and grandchildren, as well as visibility or prestige for individuals involved at high levels. A foundation can also establish a legacy that may outlast the original donor or donors by generations.

Once you decide to establish a foundation, there is some preliminary work. Planning is critical to ensure that your foundation begins with a solid framework that reflects your goals. Ask yourself some key questions before you sit down to draft any establishing documents: What is your primary goal in creating this foundation? Who will do most of the work in establishing it? Where will the start-up capital come from? Who will run it once it is established, and how will it sustain itself?

Perhaps the most common type of foundation is a “private endowed foundation,” in which the assets form a principal, or endowment, that is invested by the board of directors. Annual distributions are intended to be made from the investment income, leaving the principal alone. The foundation must make annual gifts that meet or exceed 5 percent of the assets’ overall fair market value.

A “pass-through foundation,” by contrast, distributes all of the contributions it receives in a given year, whether cash or property. This status can be made or revoked on a year-to-year basis, and offers certain tax advantages.

A “private operating foundation” uses the bulk of its income to run its own charitable programs or services, such as to operate a museum or research facility, rather than to make grants to other organizations. Donors to operating foundations can generally take advantage of the more liberal limits relating to income tax deductions that apply to gifts to public charities.

No matter what sort of foundation you decide to create, you will want to enlist competent professionals to help you establish it. At a minimum, you will want legal counsel to ensure that your documentation is in order. You should also involve your financial adviser, who can offer perspective on the foundation in the context of your overall financial goals and your estate plan, especially if you expect to make bequests to the organization once it is established.

When you and your team are ready to begin the process of formal incorporation, it is important to recognize that state law will directly govern your foundation’s structure. Some states, such as Delaware, Arizona, Nevada and Wisconsin, offer especially beneficial legal frameworks. However, you will generally need a legal representative in the state in which you establish the foundation. Also, since complications can arise if you conduct significant business elsewhere, the state in which you reside or do business may prove to be the simpler choice.

A foundation can generally be established as a charitable trust or as a corporation. A trust-based foundation is generally set up through an irrevocable trust document and offers less flexibility than a corporation, but also generally involves less paperwork and is governed by slightly more lenient regulations.

If you decide to set up your foundation as a corporation, you will need to draft and adopt bylaws. These should include provisions for the organization’s governance, the process for selecting board members, required meetings and conflict-of-interest policies. Many online resources offer sample bylaws for private foundations. Note, however, that the specific rules for bylaws will vary from state to state. Be certain to follow any applicable legal requirements.

You will also want to decide whether you can afford paid staff. A rule of thumb is that no more than 15 percent of the total annual charitable budget of a foundation should be used for administrative expenses, including employee salaries. However, hiring professionals also offers some advantages over relying exclusively on volunteers, so each situation is unique. It is also possible to hire organizations that specialize in providing support to foundations. Relying on family members, paid or unpaid, can offer advantages such as encouraging a philanthropic mindset and providing work experience, but relying too much on family can limit networking opportunities and can leave you without experienced support in critical areas. Note, too, that some states limit the percentage of a foundation’s governing body that may be composed of “interested directors,” meaning family members as well as people who receive compensation.

As for succession planning, begin with the end in mind. Most donors who establish foundations expect them to last well beyond their direct involvement, or even their lifetimes. By drawing up plans at the outset for passing control in an orderly fashion, you will simplify your own eventual exit, and do the same for changes in leadership that will follow you.

Similarly, while many states do not require your bylaws to specifically lay out the criteria for grants, doing so has many advantages. By determining clear award criteria, you can remove some ambiguity while leaving the foundation’s flexibility intact. Ideally, clear direction of this sort can also head off disagreements among officers or board members down the road.

In addition to creating your bylaws (or trust document) in accordance with state requirements, you will also need to obtain tax-exempt status from the Internal Revenue Service. To do so, you must submit Form 1023, “Application for Recognition of Exemption.” You will also need a federal Employer Identification Number, or EIN, even if your foundation will not have employees. If the IRS approves your application, your foundation will become a Section 501(c)(3) organization, making it exempt from income tax.

Once a foundation is up and running, there are many rules and reporting requirements to keep in mind. With assistance and planning, however, a foundation can offer a long-lived philanthropic channel, helping you and your successors meet your charitable goals for years to come.

The Benefits and Challenges of A Foundation Job Search

March 7th, 2021

OK, let’s start with the benefits of foundation job seeking:

Foundation Job Seeking 101; first it always best to know what the challenges are, and what you get out of seeking a job at a foundation/nonprofit…

(1) They are attractive to work at because they are mission driven and they offer a do-good feeling from working at them.

At a foundation you can work someone you actually care about. And because of this (in the job-seeking stage) they also expect you to offer more than just a resume match.

To secure a position you will need to demonstrate a personality fit, and your proven passion for their mission.

Even your outside activities all matter to foundation employers.

Bottom line: foundations are looking for people who care about their purpose as much as they do.

As long as you are active in pursuing your interests this will help you, but in situations where job seekers have been passive about volunteering, or working in for such a purpose this will work against you.

(2) Another Big Benefit Are “The People” In The Sector.

We are progressive, open to change, and care about our communities; where else can you find this?

In general foundation employers truly care about their staff and are normally open to committee decision making.

This is different than for-profits. For-profit companies are top down only decision makers (traditionally) and normally do not “discuss” their decisions openly before they are made in the same way. This is a great strength but also a great challenge. For this reason expect the hiring process to take a bit longer.

Though the process is time intensive, it is also offers stability, reliability, and employee buy in. Things that are very important when considering foundation leaders are responsible to boards, and many times must justify their decisions. Another benefit of difference in seeking in the foundation sector is that it allows us to passionately work in an area without appearing like “fanatical jobseeker.”

If you approached a for-profit with as much direct experience as many foundation jobseekers do, you would probably be labeled a stalker or out for personal gain. Honestly, try telling a Finance Director at Gap Inc., that you watched them speak at the most recent event at a conference, that you volunteered at their two last gala/events since 2012, met their personal assistant at an art show last week, read the last three publications they had written, that you are very devoted what they do, and really want to work with them. They will be either terrified of you, or expect you to do their laundry.

Foundations are different. You are expected to network in their area of expertise, read their works, meet their employees, and volunteer at their events. In fact that is fastest way to get hired at one.

Unlike for-profit corporations the information you need to secure a job lead is very available in the foundation sector. You always hear people say this, getting a job is all about networking. For better or worse, finding the best job for you often comes down to knowing the right people. Maintain relationships from past jobs, internships and volunteer experiences.” Thus, having the correct experience volunteering, and the right approach is a strong way in.

Remember that in the foundation world it is much better publicized when their events are, and how to get involved with an organization.

Each of these are opportunities to get your foot in the door.

So, go to their website, and you will find many doorways in.

Information on how to volunteer, and even the Executive Director’s email is normally located right there.

The challenges of seeking foundation jobs:

(1) Finding the position you are right for and sticking with it. (RECRUITERS SEE THIS EVERYDAY!) If you can choose a position that you are interested and stick with it you will always be employed.

Story: many people always say, “wow I would be great at event planning,” but only stay in the position (if they can get it) for a year to three years on average.

This is the same for Grant Writers, why are they so in demand? This is because most people do not stay in the area, or only dabble in their creation.

The key is to find a position/area you are right for and sticking with it.

This is the key to your professional success and it is also your hardest decision.

Don’t go from development back to programs.

Don’t go from operations to marketing.

These leaps are very hard to pull off.

Decide what you want to do today and start working in it; if you don’t have enough experience in it to get paid yet; volunteer.

If you are senior level and are not working in it now, better join a board.

(2) Choosing and sticking to a general area of interest and overall mission or niche within the foundation sector.

Jobseekers everyday are surprised when they are not selected for an opportunity, and may have come in second or third in the interview process.

I would say 8 out of 10 times it is because another person had prior exact industry experience in the position.

So, if you are working in education, stay in education, if you are working in a religious organization stay in what you know.

Of course people also get board and need change. This is the biggest challenge in foundation job-seeking: finding an area that you like and sticking to it.

Remember you are most qualified for working in the area you are currently in, so choose wisely the positions and roads you enter.

(3) In the foundation sector we are very diverse in ethnicity, but not always diverse in beliefs within each organization. This can be limiting in some ways.

Since we are mission driven entities and most foundations hire individuals that morally agree with their actions, this can limit our exposure to outside beliefs and competitive information.

Organizations hire individuals aligned with their mission, and normally do not hire disinterested perspectives.

This is also why having an active board is so important for foundations, and also why we hear in the recruiter sector “I don’t want a yes person,” from executive directors/CEO’s.

This problem does not exist as much for the for-profit sector. Disinterested perspectives and stockholders are actually required for may many larger for-profit corporations.

Foundation List: A nonprofit job site for foundation employment and the nonprofit sector.

We are a socially conscious entity and nonprofit job site providing information about foundation jobs and nonprofit industry news. It is our mission to connect national, global, and international foundations to passionate mission minded foundation job seekers. As a social venue (and nonprofit job board made just for foundations) Foundation List offers a unique pathway for foundations of all sizes seeking a venue to locate new staff and executives.

In addition, we provide a free open online nonprofit forum (called the Foundation Forum) where foundation staff and nonprofit minded professionals, donors, advocates, and vendors can take part in discussions, and pose questions about grantmaking, philanthropy, job seeking, nonprofit and foundation programming, and upcoming events. We welcome you to join us!

The Foundation Forum is a free open forum for all registered users where they may discuss industry related information exclusively about and pertaining to foundations. No sales information or job posts are listed in the Forum. Discussions are also limited to pertaining to foundation trends, growth, industry information, networking, job seeking, events, and related foundation information and questions. We list foundation jobs, discussions, foundation news and more! If you have ideas or would like to contribute content or ideas, we want to hear from you.