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HomeTipsWant to Set Up a Private Foundation? 4 Dos and 3 Don'ts

Want to Set Up a Private Foundation? 4 Dos and 3 Don’ts

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Whether you have the time and resources to create a fully-fledged national charity or are simply trying to raise funds for a community park, setting up a private foundation will grant you more control than joining a pre-existing foundation.

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That being said, creating your own foundation can take some extra work. What’s more, you’ll have to watch out for some pitfalls that many would-be philanthropists fall into.

Before you get started on your nonprofit application process, make sure you read these four Dos and three Don’ts to ensure the best outcome for your cause.

Do Have a Passion for your Cause

Without having a serious passion for the cause your foundation is fighting for, it will be all too easy to let discouragement get in the way. Possessing true dedication to your cause will keep you motivated and inspire those you’re hoping will contribute to the nonprofit.

Patti’s Way founder Steve Streit was inspired by his late mother to create his nonprofit. While not required, having a personal connection to your charitable work can also keep you and those you work with engaged. If you lack this genuine interest or personal connection, perhaps joining a pre-established foundation is more up your alley.

Don’t Create Redundancy

Odds are if your cause is worthy, others will have thought of it. Multiple nonprofit organizations fighting the same issue can still be productive, to an extent. That said, look out for the possibility of redundancy.

Too many nonprofits in one area can spread already limited resources thin and actually decrease the amount of work that can be achieved. In some cases, your time and effort could be better used as an active board member of an existing nonprofit as opposed to creating your own.

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Do Research Similar Groups

Research Similar Groups Private Foundation

Researching how similar foundations have been successful can start you down the right path. By reaching out to these organizations, you can get advice as well as connections for potential collaboration down the road.

Nonprofits will often work together to save on costs and increase exposure, among other benefits. Even if your foundation is set to tackle a unique issue, having familiarity with the steps other foundations have taken can set yours up for success.

Don’t Spend Frivolously

It should go without saying that the majority of your foundation’s funds should be going directly to the cause at hand. That said, you’ll likely have expenses ranging from supplies to office space. While your daytime job may be at a company profitable enough to give you an office in a luxury high rise and a high rent district, most nonprofits should not provide such luxuries. As much money as possible should be devoted to the program.

Do Get the Word Out

While you should probably stay clear of using donors’ money for expensive commercials and full-page advertisements, you’ll need to spread the word about your nonprofit somehow.

Word of mouth is helpful, but there are far more creative ways to market your nonprofit. Local news stations may jump on the opportunity to rave about a new nonprofit and share a feel-good story. Having a few active social media accounts that describe and promote your nonprofit can also be a cost-effective way to gain exposure. If your foundation becomes significantly successful, you can reconsider traditional methods of advertising. But tackling your organization’s issue should always come first.

Also Read: Why Account-Based Marketing is Essential for your Small Business in 2022

Don’t Wait on Filing Paperwork

Before you can gain tax exemption status, your foundation must go through the proper bureaucratic steps. If you’re living in the US, you’ll likely want to gain tax exemption through status as a 501(c)(3) nonprofit organization. This means filing with state, federal, and potentially local agencies.

The fun doesn’t stop once you’ve gained tax exemption, as you’ll need to continually report and explain expenses to maintain that nonprofit status.

Do Report Results

It’s time to forgo your inherent modesty. Showcasing your foundation’s successes is essential to maintain current donors and volunteers and bring in new ones.

With well over a million nonprofit foundations in the US, you can find many examples of what to do and what not to do. Fortunately, only about 30% of nonprofits fail in the first 10 years. If you haven’t been deterred from starting a private foundation, you’re already on your way to making a difference.

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