Legal topics
Private foundations.
Lasting control over how your charitable money is granted, in exchange for a stricter rulebook and a public annual filing.
Private foundation or donor-advised fund?
This is the first fork, and the honest answer for many families is the donor-advised fund. Foundations carry real administrative weight that only makes sense above a certain size and level of intent.
| Private foundation | Donor-advised fund | |
|---|---|---|
| Control over grants | Full and legally binding | Advisory, the sponsor holds legal control |
| Setup and running cost | Significant, own entity, own filings, own governance | Minimal |
| Annual filing | Form 990-PF, public | None by the donor |
| Distribution requirement | Yes, an annual minimum | No statutory minimum |
| Anonymity | Limited, 990-PF is public | Available |
| Can employ family | Yes, with strict limits on compensation | No |
The rules that come with the control
Private foundations are more heavily regulated than public charities precisely because they are funded and controlled by a narrow group. In broad terms the regime addresses:
Areas of regulation
- Self-dealing: transactions between the foundation and its substantial contributors, managers, and their families are restricted, in some cases regardless of fairness.
- Minimum distributions: a required annual payout toward charitable purposes.
- Excess business holdings: limits on how much of an operating business a foundation and its insiders may hold together.
- Jeopardising investments: investments that imperil the charitable purpose.
- Taxable expenditures: grants outside permitted purposes, and lobbying restrictions.
- Excise tax on net investment income.
These rules carry penalty taxes, and several apply to the individual manager as well as to the foundation. The specifics change with legislation and should be confirmed currently, that is squarely legal and tax work.
Formation and the entity underneath
A private foundation is typically organised either as a nonprofit corporation or as a trust. The corporate form is the more common choice in most states because governance is familiar and directors have clearer liability protection.
Where it is a nonprofit corporation, everything ordinary about a corporation applies: articles filed with a state, a registered agent, annual reports, a board, bylaws, and minutes. We form Wyoming nonprofit corporations and California nonprofit corporations for $595, and maintain them thereafter.
Forming the entity is not obtaining exemption
Filing articles of incorporation creates a nonprofit corporation under state law. It does not make it tax-exempt. Federal exemption requires a separate application to the IRS, and the classification question, private foundation versus public charity, is determined there. We do the state formation. The exemption application and the classification strategy are legal and tax work.
Where Tresp Corporate Services fits
What Tresp Corporate Services does here
Structures of this kind are built out of entities, and entities need forming, filing, and maintaining. That part is ours:
Our role
- Form the entities in Wyoming or California
- Act as registered agent in every state where an entity sits
- File the annual reports and keep each entity in good standing
- Maintain the minutes, resolutions, and records that evidence each entity is real and separate
- Provide mail forwarding and public record address service where the structure calls for it
We do not prepare exemption applications, advise on classification, or handle Form 990-PF. The design of the structure, and whether it suits you at all, is legal work performed by attorneys, not by us.
The independent firm Tresp, Day & Associates, Inc. advises on private foundations and charitable planning.
Information, not advice
This page explains a general legal concept so you can have a better-informed conversation. Tresp Corporate Services, LLC is not a law firm, does not provide legal advice, and forms no attorney-client relationship with you. Nothing here is a recommendation about your circumstances or a prediction about your outcome, nobody can offer either without knowing your facts. For advice on your situation, speak with the independent firm Tresp, Day & Associates, Inc. or counsel of your own choosing.
Need a nonprofit corporation formed or maintained?
We handle formation, registered agent, and compliance. For the legal question, we will point you to the firm.
Common questions
Frequently asked
What is a private foundation?
A charitable organisation exempt under section 501(c)(3) that is typically funded by a single family or company rather than the general public, and is classified as a private foundation rather than a public charity. The donor retains lasting control over grantmaking, subject to a stricter regulatory regime.
Private foundation or donor-advised fund?
A foundation gives full legal control over grants, can employ family members within limits, and files a public Form 990-PF. A donor-advised fund is far cheaper and simpler, requires no filing by the donor, and allows anonymity, but the sponsoring organisation holds legal control and the donor's role is advisory.
Does forming a nonprofit corporation make it tax-exempt?
No. Filing articles of incorporation creates a nonprofit corporation under state law. Federal tax exemption requires a separate application to the IRS, which is also where the private foundation versus public charity classification is determined.
What does it cost to form a nonprofit corporation?
Tresp Corporate Services forms a Wyoming or California nonprofit corporation for $595. That covers the state formation only, not the federal exemption application.
Tresp Corporate Services, LLC provides corporate, registered-agent, and compliance services and does not provide legal advice. For legal matters, we work in tandem with the independent law firm Tresp, Day & Associates, Inc. This page is general information only.
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