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Navigating the Path to Creating a Private Foundation: A Comprehensive Guide

Establishing a private foundation can be a powerful way for individuals, families, or businesses to make a meaningful impact on the community and causes they care about. It’s a journey that requires careful planning and understanding of legal, financial, and operational aspects. In this blog post, we’ll walk through the key steps to start a private foundation and highlight some firms that specialize in managing these philanthropic entities.

Understanding Private Foundations

A private foundation is a nonprofit organization, primarily funded by an individual, family, or corporation. Unlike public charities, private foundations don’t typically engage in fundraising. Instead, they make grants to other charitable organizations or directly fund charitable activities.

Steps to Start a Private Foundation

  1. Clarify Your Mission and Vision: The first step is to define the mission and vision of your foundation. This will guide all your activities and decisions. Determine what causes or issues the foundation will focus on and what change you hope to effect.
  2. Choose a Legal Structure: Most private foundations are set up as either a trust or a corporation. Each structure has its advantages and legal implications. Trusts are generally simpler to administer but offer less flexibility than corporations. Consult with a legal advisor to determine the best fit for your goals.
  3. Draft a Governing Document: For trusts, this is a trust agreement; for corporations, it’s articles of incorporation and bylaws. These documents should outline the foundation’s purpose, governance structure, operational procedures, and the roles and responsibilities of board members.
  4. Obtain Legal Counsel: It’s crucial to seek legal advice to navigate the complex regulations surrounding private foundations. A lawyer can help with drafting governing documents, filing for tax-exempt status, and ensuring compliance with IRS regulations.
  5. File for Tax-Exempt Status: To operate as a private foundation, you must apply for and obtain 501(c)(3) tax-exempt status from the IRS. This involves submitting Form 1023 or 1023-EZ along with your governing documents and a detailed description of your planned activities. Work with your tax advisor to complete this step.
  6. Set Up Funding: Fund your foundation with an initial financial contribution. This can be in the form of cash, stocks, real estate, or other assets. The amount of funding will depend on your philanthropic goals and capacity.
  7. Develop an Investment Strategy: Develop a strategy to manage and grow the foundation’s assets. This often involves creating an investment policy statement and deciding on an asset allocation that aligns with your foundation’s goals and risk tolerance.
  8. Establish Administrative Practices: Decide on the operational aspects, like accounting systems, grantmaking processes, and staff requirements. Efficient administration is key to the foundation’s success and compliance with legal requirements.

Firms That Manage Private Foundations

Several firms specialize in providing administrative, legal, and investment management services for private foundations. Some notable names include:

  • Crewe Foundation Services: A division of Crewe Advisors that establishes and manages private foundations, facilitates charitable donations and more.
  • Foundation Source: A comprehensive service provider for private foundations, offering administrative support, online tools, and philanthropic advisory services.
  • Glenmede: Known for its investment management and advisory services tailored to private foundations.
  • BNY Mellon Wealth Management: Offers specialized services in investment management and strategic planning for private foundations.
  • Vanguard Charitable: Provides investment management services and expertise in maximizing the impact of philanthropic efforts.


Creating a private foundation is a noble and impactful way to contribute to societal good. However, it’s a process that requires thoughtful planning, strategic decision-making, and adherence to legal and financial regulations. By understanding the steps involved, seeking professional advice, and possibly partnering with firms that specialize in managing private foundations, you can ensure that your foundation is well-positioned to achieve its philanthropic goals. Remember, the journey of a private foundation is not just about the grants it makes, but about the legacy it builds and the impact it creates in the world.

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