A foundation is a special type of a nonprofit company which can help in supporting charitable activities in order for them to help people in need. Most of the time, a foundation is created with endowments or donations, which is money given by corporations, families, or as a part of private philanthropy. Typically, this kind of foundation is going to run programs for the income which has been acquired through investing endowments.
Right now, only a few foundations in the world implement a great deal of discretion as to which specific charitable organizations to whom they give their grants. However, some are very limited due to the mandate of the donors, while some are just allowed to allot funds to a certain cause. And still, there are those that have limit to grant making to a specific geographical area.
There are basically three major types of grant making foundations that you can find today. The one which is seen the most often right now is the so-called independent foundations of privately run organizations. These are typically started by only one person, a family, or a group of individuals, and should be run by the donors themselves or members of their family, a type which is often referred to as a family foundation or one being run by the third party independent board.
Another type is the corporate institutions, and this is created and funded by a company as a separate entity, overseen by board of directions usually composed of the officials in the company. Corporations could build private institutions with endowments or donations, gather contribution from a profit, or even take some of the two ways in order to provide resources for the foundation.
The foundation companies can also run their own in-house programs, not like the rest of the corporate businesses, and these are also under the complete control of the company, without any requirement for them to adhere to the same rules of the IRS.
The third type is the public or community foundation. This one is being supported by the public and this is as a benefit to and funded by a specific community or geographic region.
Foundations are being regulated by rules and laws which are relatively much stricter than they are for the public charities which are actually being funded by raising money from the general public in order to run and operate the institutions and programs. Although the two might use the same term foundation as part of their name or title, completely different regulations are applicable to each one.
There are some specific regulations implemented by the IRS when it comes to independent and corporate foundations. They are being required to pay a minimum of 5 percent of the year end fair market value of all the assets they have. Since the foundation as considered as a private charity by the Internal Revenue Service, they will not be subjected to the similar laws as an independent or corporate foundation.