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Private Foundations

Private foundations are charitable organizations that are typically established by an individual, family or corporation to support charitable activities. Private foundations are similar to donor advised funds in serving as an intermediary destination between funds leaving from a donor and being received by an operating charity. By design, most private foundations do not operate themselves but rather direct funds to other charitable organizations which do.

A private foundation is a separate legal entity, with its own board of directors or trustees that oversees it. Because of its independent legal status, a private foundation allows for more control and creative options for a donor than would a donor-advised fund that must answer to its administrator.

Private foundations are the optimal structure for those that want to operate a charitable organization and potentially employ a staff, hire investment managers, actively manage grant-making, and sponsor charitable events. Private foundations can hold nearly any kind of asset – including private equity, limited partner interests, real estate, and even intangible personal property. A private foundation can’t just hold its money indefinitely, as the IRS requires private non-operating foundations to distribute 5% of the value of their net investment assets each year either as grants or eligible administrative expenses.

Private foundations are required to file detailed tax returns with the names of board members and donors, grants, investment fees, board and staff compensation, etc., which are public records and easily accessible via the internet.

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