What is a Foundation?

Posted by Estela Kennen Feb 22, 2007

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.