LoginAbout Compound

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.

This material presented on Compound’s Manual is for informational purposes only and should not be construed as legal, tax, accounting or investment advice. Under no circumstances should any material on this Manual be used for or considered as an offer to sell or a solicitation of any offer to buy an interest in any securities or investment fund. The material on this website does not constitute, and may not be used in connection with, an offer or solicitation by anyone in any jurisdiction in which such offer or solicitation is not permitted by law or in which the person making such offer or solicitation is not qualified to do so or to any person to whom it is unlawful to make such offer or solicitation.Any analysis or discussion of financial planning matters, investments, sectors or the market generally are based on current information, including from public sources, that we consider reliable, but we do not represent that any research or the information provided is accurate or complete, and it should not be relied on as such. Our views and opinions expressed on this Manual or in any post content are current at the time of publication and are subject to change.