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Feb 22, 2007

What is a Foundation?

A private foundation:

  • Is a 501(c)(3) tax-exempt organization
  • Exists to promote social, educational, religious or other charitable activities
  • Is usually tightly controlled
  • Is typically funded mostly or entirely by one or a few donors
  • Is not directly involved in service
  • Makes grants to other organizations
  • Must distribute a certain amount of money each year

A private foundation differs greatly from most 501(c)(3) organizations, which provide direct services and receive contributions from a wide assortment of sources.

Foundations are often categorized by who funds and manages them:

  • Corporate Foundation: A foundation funded by, but legally separate from, a for-profit business. Businesses often start foundations as a way of creating good will towards the company and giving back to the community.
  • Community Foundation: A foundation funded by many individuals from a given geographic area. A community foundation can serve a city, county, or even an entire state, and it allows locals to contribute charitably without having to start or run their own foundations.
  • Family Foundation: A foundation funded from members of a single family. The family, or at least a family member, manages the foundation and decides what organizations shall benefit from its grant-making.