One of the most important pillars of our society is the benefits provided by public charities and philanthropic foundations. From arts and culture to relief organizations, much of the good is done in our local communities and throughout the nation because of the vision and foresight of the individuals and families who founded these important organizations.
Not surprisingly, though, many philanthropically minded folks who have a deep commitment to giving back to society are uncertain about how to get started. They have the resources, the desire, and the commitment to build a legacy that will make a difference in their community, but they aren’t sure about the first steps. Certainly, there is much to consider when launching such an organization. Let’s take a look at a few of the initial decisions that need to be made to get a philanthropic organization started on the right foot.
Legal and tax structures.
The first step is to organize and register as the correct 501(c)3 organization type. Notice that we said “the correct type,” because there is more than one.
Should your organization be a true private foundation or a public charity? Organizations primarily funded through the gifts of a particular individual, enterprise, or family, will often serve the founders’ vision better if organized as a private foundation. A good example is the Bill and Melinda Gates Foundation, which is funded almost entirely by a particular group of individuals and the corporation with which they are associated. Public charities, such as the Make-a-Wish Foundation, on the other hand, are funded mostly by public gifts that can come from almost anyone, anywhere.
The source of funding and the means of fundraising for your foundation is pretty important, in terms of registration and legal structures. A public charity must typically be registered in every state where donations are solicited. Additionally, public charities usually spend a lot more time and effort on fundraising, partly because they depend on a large quantity of smaller gifts, as opposed to private foundations, which usually receive large sums of funds on fewer occasions.
Finding your fit.
And other factors for initial consideration go beyond financial and legal requirements. You need to think carefully about exactly what your goals are. These vital parameters include attention to matters such as:
- Need. Many founders of philanthropic organizations may spend months or more performing a detailed needs analysis for their intended area of impact, including a survey of other organizations that might have similar missions and objectives. If someone else is already doing a good job at what you’re interested in, supporting their efforts might make more sense, rather than “reinventing the wheel.”
- Purpose. A concise, carefully worded mission statement will help you crystallize your goals and methods, including your granting guidelines and target sectors.
- Business plan. Even though they are non-profit enterprises, charitable organizations need detailed operating plans and procedures to function efficiently.
- Governance. Aim to recruit the most qualified people you can find—preferably those who share a passion for your desired objectives—to serve on your board of directors.
Preparing the next generation.
One of the most important factors for philanthropic organizations that intend to extend their impact down through the years is attention to educating the next generation of family leaders to ensure their commitment to the dreams and goals of the founders. This shouldn’t be put off until “the kids are older”; it should be baked into the very beginnings of the organization. According to experts, the “philanthropy mindset” is learned in early childhood, and that learning then extends throughout the individual’s life.
Finally, you’ll need the services of a qualified legal professional who has experience with charities, nonprofits, and private foundations. They can advise and assist with filing the proper applications for tax-exempt status, drafting a corporate charter, and helping with other legal matters that must be in place as your launch your organization.
As a fiduciary wealth advisor, Aspen Wealth Management has the knowledge, experience and commitment to help individuals who want to leave a lasting legacy and give back to the causes they believe in. To learn more, set up a free, no-obligation consultation.