Foundation (charity)
Encyclopedia
A foundation is a legal categorization of nonprofit organizations that will typically either donate funds and support to other organizations, or provide the source of funding for its own charitable purposes.
This type of non-profit organization differs from a private foundation
which is typically endowed by an individual or family.
Some of the above must be, in most jurisdictions, expressed in the document of establishment. Others may be provided by the supervising authority at each particular jurisdiction.
Foundations as legal structures (legal entities
) and/or legal persons (legal personality
), may have a diversity of forms and may follow diverse regulations depending on the jurisdiction where they are created.
In some jurisdictions, a foundation may acquire its legal personality when it is entered in a public registry, while in other countries a foundation may acquire legal personality by the mere action of creation through a required document. Unlike a company, foundations have no shareholders, though they may have a board, an assembly and voting members. A foundation may hold assets in its own name for the purposes set out in its constitutive documents, and its administration and operation are carried out in accordance with its statutes or articles of association rather than fiduciary principles. The foundation has a distinct patrimony
independent of its founder
.
Foundations are often set up for charitable purposes, family patrimony and collective purposes.
A German foundation can either be charitable or serving private interest. Charitable foundations enjoy tax shelter and can at the same time be engaged in commercial activities, if so only the commercially active part of the entity is taxed. A family foundation (serving private interest) is taxed like any other legal entity. There is no central register for German foundations.
Only charitable foundations are subject to supervision of state authorities. Family foundations are not supervised after establishment. All forms of foundations can however be eliminated if they pursue anti-constitutional aims. Foundations are supervised by local authorities within each state (Bundesland
) due to the fact that each Bundesland has exclusive legislative power over the laws governing foundation.
In contrast to many other countries, German law allows a tax sheltered charitable foundation to distribute up to one third of its profit to the founder and the next of his kin, if they are needy, or for maintenance of the founder's grave. These benefits are subject to taxation.
, there are about 15,000 foundations in Germany, about 85% of them are charitable foundations. It is notable that more than 250 charitable German foundations have existed for more than 500 years, the oldest dates back to 1509. Although there are so many charitable foundations, there are also large German corporations owned by foundations, e.g. Bertelsmann
, Carl Zeiss AG or Lidl
.
Foundations are the main providers of private scholarship
s (Stipendien) to German students.
The main legal instruments governing foundations in Sweden are the Foundation Act (1994:1220) and the Regulation for Foundations (1995:1280).
, but both are charities. They collectively comprise a large asset base for philanthropy
Trusts have no legal personality and companies acquire their legal status through the Company law and the required documents of incorporation. Foundations are not required to register with any public authority.
are considering introducing civil law type foundations into its law. A consultation paper presenting a general discussion on foundations was brought forth to the Jersey government concerning this possibility.
adopted by the states of Jersey 22 October 2008 - Foundations (Jersey) Law 200-
is in use (for example, the Wellcome Trust
).
s (usually funded by an individual, family, or corporation) and public charities (community foundation
s or other nonprofit groups that raise money from the general public). While they offer donors more control over their charitable giving, private foundations have more restrictions and fewer tax benefits than public charities.
This type of non-profit organization differs from a private foundation
Private foundation
A private foundation is a legal entity set up by an individual, a family or a group of individuals, for a purpose such as philanthropy. The Bill & Melinda Gates Foundation is the largest private foundation in the U.S. with over $38 billion in assets...
which is typically endowed by an individual or family.
Description
One of the characteristics of the legal entities existing under the status of "Foundations", is a wide diversity of structures and purposes. Nevertheless, there are some common structural elements that are the first observed under legal scrutiny or classification.- Legal requirements followed for establishment
- Purpose of the foundation
- Economic activity
- Supervision and management provisions
- Accountability and Auditing provisions
- Provisions for the amendment of the statutes or articles of incorporation
- Provisions for the dissolution of the entity
- Tax status of corporate and private donors
- Tax status of the foundation
Some of the above must be, in most jurisdictions, expressed in the document of establishment. Others may be provided by the supervising authority at each particular jurisdiction.
Foundations in civil law
The term "foundation," in general, is used to describe a distinct legal entity.Foundations as legal structures (legal entities
Legal personality
Legal personality is the characteristic of a non-human entity regarded by law to have the status of a person....
) and/or legal persons (legal personality
Legal personality
Legal personality is the characteristic of a non-human entity regarded by law to have the status of a person....
), may have a diversity of forms and may follow diverse regulations depending on the jurisdiction where they are created.
In some jurisdictions, a foundation may acquire its legal personality when it is entered in a public registry, while in other countries a foundation may acquire legal personality by the mere action of creation through a required document. Unlike a company, foundations have no shareholders, though they may have a board, an assembly and voting members. A foundation may hold assets in its own name for the purposes set out in its constitutive documents, and its administration and operation are carried out in accordance with its statutes or articles of association rather than fiduciary principles. The foundation has a distinct patrimony
Property
Property is any physical or intangible entity that is owned by a person or jointly by a group of people or a legal entity like a corporation...
independent of its founder
Entrepreneur
An entrepreneur is an owner or manager of a business enterprise who makes money through risk and initiative.The term was originally a loanword from French and was first defined by the Irish-French economist Richard Cantillon. Entrepreneur in English is a term applied to a person who is willing to...
.
Foundations are often set up for charitable purposes, family patrimony and collective purposes.
Finland
Foundations in Finland must have state approval and register at the National Board of Patents and Registration within six months from its creation. A minimum capital of € 25,000 is obligatory. A foundation can be created with any legal purpose and may have economic activity if this is specified in its Bylaws and the business supports the foundation's purpose.France
There are not many Foundations in comparison to the rest of Europe. In practice public administration requires at least €1 million is considered necessary. States representatives have a mandatory seat in the Board.Germany
German regulations allow for the creation of any foundation for public or private purposes in keeping with the concept of a gemeinwohlkonforme Allzweckstiftung. Commercial activities should not be the main purpose of the foundation, but they are permitted if this serves the main purpose of the foundation. There is no minimum starting capital, although in practice at least €50,000 is considered necessary.A German foundation can either be charitable or serving private interest. Charitable foundations enjoy tax shelter and can at the same time be engaged in commercial activities, if so only the commercially active part of the entity is taxed. A family foundation (serving private interest) is taxed like any other legal entity. There is no central register for German foundations.
Only charitable foundations are subject to supervision of state authorities. Family foundations are not supervised after establishment. All forms of foundations can however be eliminated if they pursue anti-constitutional aims. Foundations are supervised by local authorities within each state (Bundesland
States of Germany
Germany is made up of sixteen which are partly sovereign constituent states of the Federal Republic of Germany. Land literally translates as "country", and constitutionally speaking, they are constituent countries...
) due to the fact that each Bundesland has exclusive legislative power over the laws governing foundation.
In contrast to many other countries, German law allows a tax sheltered charitable foundation to distribute up to one third of its profit to the founder and the next of his kin, if they are needy, or for maintenance of the founder's grave. These benefits are subject to taxation.
, there are about 15,000 foundations in Germany, about 85% of them are charitable foundations. It is notable that more than 250 charitable German foundations have existed for more than 500 years, the oldest dates back to 1509. Although there are so many charitable foundations, there are also large German corporations owned by foundations, e.g. Bertelsmann
Bertelsmann
Bertelsmann AG is a multinational media corporation founded in 1835, based in Gütersloh, Germany. The company operates in 63 countries and employs 102,983 workers , which makes it the most international media corporation in the world. In 2008 the company reported a €16.118 billion consolidated...
, Carl Zeiss AG or Lidl
Lidl
Lidl is a discount supermarket chain based in Germany that operates over 7,200 stores across Europe. The company's full name is Lidl Stiftung & Co. KG...
.
Foundations are the main providers of private scholarship
Scholarship
A scholarship is an award of financial aid for a student to further education. Scholarships are awarded on various criteria usually reflecting the values and purposes of the donor or founder of the award.-Types:...
s (Stipendien) to German students.
Italy
In Italy, a foundation is a private non profit and autonomous organisation, its assets must be dedicated to a purpose established by the founder. The founder cannot receive any benefits from the foundation or have reverted the initial assets. The private foundations or civil code foundations are under the section about non commercial entities of the first book (Libro Primo) of the Civil Code of Law (Codice Civile) from 1942. The Art. 16 CC establishes that the statutes of the foundation must contain its name, purpose, assets, domicile, administrative organs and regulations, and how the grants will be distributed. The founder must write a declaration of intention including a purpose and endow assets for such purpose. This document can be in the form of a notarised deed or a will. To obtain legal personality, the foundation must enroll in the legal register of each Prefettura (local authority) or some cases the regional authority. There are several nuances in requirements according to each foundation's purpose and area of activity.Spain
Foundations in Spain are organizations founded with the purpose of not seeking profit and serving the general needs of the public. Such foundation may be founded by private individuals or by the public. These foundations have an independent legal personality separate from their founders. Foundations serve the general needs of the public with a patrimony that funds public services and which may not be distributed to the founders' benefit.Sweden
A foundation in Sweden (Stiftelse) is a legal entity without an owner. It is formed by a letter of donation from a founder donating funds or assets to be administered for a specific purpose. When the purpose is for the public benefit, a foundation may enjoy favourable tax treatment. A foundation may have diverse purposes, including but not limited to public benefit, humanitarian or cultural purposes, religious, collective, familiar, or the simple passive administration of funds. Normally, the supervision of a foundation is done by the county government where the foundation has its domicile, however, large foundations must be registered by the County Administrative Board (CAB), which must also supervise the administration of the foundation.The main legal instruments governing foundations in Sweden are the Foundation Act (1994:1220) and the Regulation for Foundations (1995:1280).
Canada
Under Canadian law, foundations may be public or privatePrivate foundation
A private foundation is a legal entity set up by an individual, a family or a group of individuals, for a purpose such as philanthropy. The Bill & Melinda Gates Foundation is the largest private foundation in the U.S. with over $38 billion in assets...
, but both are charities. They collectively comprise a large asset base for philanthropy
Philanthropy
Philanthropy etymologically means "the love of humanity"—love in the sense of caring for, nourishing, developing, or enhancing; humanity in the sense of "what it is to be human," or "human potential." In modern practical terms, it is "private initiatives for public good, focusing on quality of...
Ireland
The law does not prescribe any particular form for a foundation in Ireland. Most commonly, foundations are companies limited by guarantee or trusts. A foundation can obtain a charity registration number from the Revenue Commissioners for obtaining tax relief as far as they can be considered under the law on charity, however, charitable status does not exist in Ireland. The definition usually applied is that from the Pemsel Case of English jurisprudence (1891) and the Irish Income Tax Act 1967.Trusts have no legal personality and companies acquire their legal status through the Company law and the required documents of incorporation. Foundations are not required to register with any public authority.
Jersey
The States of JerseyStates of Jersey
The States of Jersey is the parliament and government of Jersey.The Assembly of the States of Jersey has exercised legislative powers since 1771, when law-making power was transferred from the Royal Court of Jersey....
are considering introducing civil law type foundations into its law. A consultation paper presenting a general discussion on foundations was brought forth to the Jersey government concerning this possibility.
adopted by the states of Jersey 22 October 2008 - Foundations (Jersey) Law 200-
United Kingdom
In the UK, the word "foundation" is sometimes used in the title of a charity, as in the British Heart Foundation and the Fairtrade Foundation. Despite this, the term is not generally used in English law, and (unlike in civil law systems) the term has no precise meaning. Instead, the concept of Charitable TrustCharitable trust
A charitable trust is an irrevocable trust established for charitable purposes, and is a more specific term than "charitable organization".-United States:...
is in use (for example, the Wellcome Trust
Wellcome Trust
The Wellcome Trust was established in 1936 as an independent charity funding research to improve human and animal health. With an endowment of around £13.9 billion, it is the United Kingdom's largest non-governmental source of funds for biomedical research...
).
USA
In the United States, many philanthropic and charitable organizations are considered to be foundations. However, the Internal Revenue Code distinguishes between private foundationPrivate foundation
A private foundation is a legal entity set up by an individual, a family or a group of individuals, for a purpose such as philanthropy. The Bill & Melinda Gates Foundation is the largest private foundation in the U.S. with over $38 billion in assets...
s (usually funded by an individual, family, or corporation) and public charities (community foundation
Community foundation
Community foundations are instruments of civil society designed to pool donations into a coordinated investment and grant making facility dedicated primarily to the social improvement of a given place...
s or other nonprofit groups that raise money from the general public). While they offer donors more control over their charitable giving, private foundations have more restrictions and fewer tax benefits than public charities.
See also
- Wikipedia articles on individual foundations
- Charitable organisation
- Charitable trustCharitable trustA charitable trust is an irrevocable trust established for charitable purposes, and is a more specific term than "charitable organization".-United States:...
- List of wealthiest foundations
- Private foundationPrivate foundationA private foundation is a legal entity set up by an individual, a family or a group of individuals, for a purpose such as philanthropy. The Bill & Melinda Gates Foundation is the largest private foundation in the U.S. with over $38 billion in assets...
- Program evaluationProgram evaluationProject evaluation is a systematic method for collecting, analyzing, and using information to answer questions about projects, policies and programs, particularly about their effectiveness and efficiency...
- Think tankThink tankA think tank is an organization that conducts research and engages in advocacy in areas such as social policy, political strategy, economics, military, and technology issues. Most think tanks are non-profit organizations, which some countries such as the United States and Canada provide with tax...
- List of charitable foundations
- Nongovernmental organization
- International nongovernmental organizationInternational nongovernmental organizationThe World Bank defines a non-governmental organization as "private organizations that pursue activities to relieve suffering, promote the interests of the poor, protect the environment, provide basic social services, or undertake community development"...
Further reading
- Dwight F. Burlingame, Philanthropy in America: A Comprehensive Historical Encyclopedia, Santa Barbara, Calif. [etc.] : ABC-CLIO, 2004
- Mark Dowie, American Foundations: An Investigative History. Cambridge, Massachusetts: The MIT Press, 2001.
- Lester SalamonLester SalamonLester M. Salamon is a professor at The Johns Hopkins University. He is also the Director of the Center for Civil Society Studies at The Johns Hopkins Institute for Policy Studies...
et al., "Global Civil Society: Dimensions of the Nonprofit Sector", 1999, Johns Hopkins Center for Civil Society Studies. - David C. Hammack, editor, "Making the Nonprofit Sector in the United States", 1998, Indiana University Press.
- Joan Roelofs, Foundations and Public Policy: The Mask of Pluralism, State University of New York Press, 2003, ISBN 0791456420
Further listening
- Joan Roelofs, The Invisible Hand of Corporate Capitalism, Recorded at Hampshire College, April 18, 2007. http://www.traprockpeace.org/edrussell/JoanRoelofs18April07AImedia.mp3