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Starting a Foundation | It can be tricky!
If you have funds of your own that you plan to use to endow the foundation, then it can be very simple. I’d start down that path by talking with staff at the appropriate community foundation. Unless you have a lot of money to put into this (more than $250,000 is what I’ve heard people say, and they usually follow that with something like “it’s better with a lot more), you will probably find that the community foundation can arrange a donor-advised fund for you that will allow you a good deal of flexibility, handle all the administrative tasks for far less cost than you would incur, and can all be done in a few days. (There are similar services offered by major financial insitutions; you might want to compare services and fees.) There are lists of community foundations at The Grantsmanship Center (http://www.tgci.com/resources/foundations/community/) and the Foundation Center (http://fdncenter.org/funders/grantmaker/gws_comm/comm.html).
If you are planning to raise money to support your foundation, then it is a great deal more complicated. You might still be able to use a donor advised fund at a community foundation, but you would need to ask them about the requirements if you want to raise money from other people to put into “your” fund.
Or you can, as your question suggests, set up a separate foundation. This process is likely to take several months to a couple of years, depending on many intricacies that only someone who knows your plans, goals and local conditions can really estimate for you. It is also likely to cost several hundred to a few thousand dollars, depending on how much outside advice you need, want and use.
The rules about incorporating foundations vary from state to state. You will need to incorporate as a first step; everything else follows from that. Incorporation can be very simple to do, but it needs to be done exactly right to avoid problems later on down the road.
For example, In order to be eligible to receive tax-deductible donations, you will need to be sure your corporation meets the requirements the IRS has developed to implement the Internal Revenue Code, especially section 501(c)(3) — and there are many other things to think about while setting up the corporation in the first place.
The you will need to apply for recognition as a tax-exempt entity under federal tax laws. The form for doing that is IRS 1023; there’s a publication you can get from the IRS, or download from www.irs.gov, called “Tax Exempt Status for My Organization” (pub. 557), that explains a lot of this. For this step, you will indeed need a business plan (since you have to provide a budget, including details of the sources and uses of funds, for the first three years of your planned program).
Foundations are governed by similar regulations for federal tax and reporting purposes to those that apply to the more familiar “public charities” — the organizations that we all know as “nonprofits.” But the prohibitions on self-dealing are more stringent and all foundations have to pay an excise tax.
As a fundraiser, you will probably also have to register with and report to your state’s charity officials (usually in the Secretary of State’s office — see http://www.multistatefiling.org for information about this subject).
Another option, especially if you are planning to assist just one or a small number of nonprofits through your foundation, would be to work out an agreement that allowed you to operate as a “program” of some established organization. You would be subject to the overall direction of the sponsoring organization’s board, but the agreement could allow substantial flexibility and scope for you to work on your cause without having to meet the administrative requirements foundation status would impose. This structure often goes under the name of “fiscal sponsorship.”
The “Start-up” section of the Nonprofit FAQ has lots of information about all these subjects, and pointers to further information as well. See http://www.nonprofits.org/npofaq and click on Start-up in the left hand column.
(If by any chance you’re in Washington state, you’ll want to get hold of the King County Bar Association’s very useful workbook “How to Form and Manintain a Nonprofit Organization” – see http://www.tess.org/pages/support2.html#publications for advice
about how to do that and other subjects. Many other states have statewide associations of nonprofits who can connect you with local resources; for a list see http://www.ncna.org)
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Bill Gates ups his billion-dollar giving
I love this article by the editor of Fortune Magazine. Read on to see how Gates is responding to the current economic downturn. All I have to say is, You go Bill!
pd
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There aren’t many optimists these days. Bill Gates, thank God, is one.
His assets – actually the assets of the Bill & Melinda Gates Foundation, where the bulk of his wealth resides – are down like everybody else’s. They declined about 20% last year, he says in his first annual letter for his foundation. Still, Gates notes in the letter released today, he and his wife have decided to increase their spending to $3.8 billion this year. vs. $3.3 billion in 2008.
The need is that great. So is the Gates’ optimism. I learned about that up-close a year ago when I wrote the first profile of Melinda that’s been done with her involvement. Fortune called her “The $100 Billion Woman” on its cover because that’s how much money – theirs and their friend Warren Buffett’s (BRK.B) combined – theyll likely give away in their lifetimes.
Bill was full of hope then – and eager to trade his Microsoft (MSFT) job for full-time work at the foundation. But here’s what strikes me about his comments in today’s letter and a conference call he held this afternoon for reporters: how hopeful he is about advances in global health, where he’s spent 50% of his philanthropic dollars. In the next four to six years, he says, he expects HIV/AIDS to be “dramatically” reduced via a pill or a microbicide, which is a gel that women use to protect themselves from infection.
As he told me a year ago, Melinda helped draw him away from singly focusing on vaccine research and scientific solutions that may be decades away. “You can’t save kids just with vaccines,” as she says. Bill says in his letter that an AIDS vaccine is coming, but it’s “very likely to be more than 10 years away.”
The Gates are traveling more than ever. Melinda is in Ethiopia now. Bill is heading to Nigeria. A malaria vaccine is another big goal for him. A vaccine will go into the last phase of human trials this year, he says, and could be ready for wide use by 2014. It goads him that companies and governments have invested little in new malaria drugs simply because the disease has been eliminated in rich countries. It kills almost 1 million children per year elsewhere. So part of his new full-time work at the foundation is to egg on pharmaceutical companies that aren’t working on vaccines for the developing world. “Nobody gives them a hard time,” he told me. “That job is natural for me to do.”
The Gates’ newest passion: agriculture. They hope to bring a “Green Revolution” to Africa similar to the program that increased crop yields in Latin America and Asia beginning in the 1940s. This is high-tech and inordinately complex work – thus their lust for the challenge. But it may be easier than fixing U.S. education. In the past decade, the Gates have spent more than $2 billion on America’s public schools and it’s been a slog except for pockets of progress like New York City, where better teachers have made all the difference. Gates says in his letter that it’s “amazing how big a difference a great teacher makes versus an ineffective one…If you want your child to get the best education possible, it is actually more important to get him assigned to a great teacher than to a great school.”
While running a foundation is not like running a business (”You don’t have customers who beat you up when you get things wrong or competitors who work to take those customers away from you,” Gates says in his letter), here’s one way the two converge: Investing in the right people gives you the best shot at success. It’s a point that management guru Jim Collins, featured in the current issue of Fortune, preaches and it’s one of the many lessons Bill Gates is learning in his new calling.