Forming a Private Foundation

Foundations are generally non-profit organizations that are funded with the goal of philanthropy. There are just about as many foundations as there are causes that need funding. Foundations could offer scholarships to students that meet certain criteria or help to fund hospitals; they could provide aid to underprivileged groups or poverty-stricken regions. The goal could be replanting areas of deforestation, working to save endangered species, or educating the public about global warming. Whatever the cause or philanthropic goal, you could create a foundation to fund it.

There are also different structures for foundations. For example, many corporate entities elect to start corporate foundations as a means of better directing their philanthropy and ensuring all applicable tax incentives.

Many wealthy individuals, families or small businesses seeking to gain similar benefits decide to form private foundations. What makes them unique is that they tend to have a single, primary donor and they are managed by their own board of directors or trustees.

What separates private foundations from public ones is that they seek no additional donations. Instead, they earn money to continue funding the foundation through investing the initial donation, after which earnings may be distributed annually via charitable or commercial activities, preserving the initial donation for further investment.

But why would a family or business want to participate in forming such a foundation? How would one go about setting it up? Here are a few things you need to know.

Why Form an Offshore Private Foundation?

There are several good reasons to form a private foundation. First and foremost, it provides an opportunity for targeted philanthropy. The funds generated by a private foundation can either be funneled into charitable activities directed by the foundation or they can be gifted to other charitable organizations that are already doing the type of philanthropy the foundation supports.

For families or businesses that wish to retain some measure of control over how the foundation’s money is directed, a private foundation can offer more opportunities than its public counterpart. There are also financial benefits to be gained, of course.

Individuals, families, and businesses with excess wealth may be interested in philanthropy not only because it makes them feel good to help others, but also because there are potential tax incentives to be gained in the process. Instead of giving money to the government for taxes, many would rather see those funds go to those in need.

Notably, not all foundations engage in philanthropy. Frequently, foundations are used for estate planning and asset protection purposes. Creating a foundation makes smart financial management sense, entrepreneurs take advantage of foundation benefits such as minimizing estate taxation liability, creating sustainable employment for family members as well as, ensuring the continuity of their business after death.

There are other ways to protect wealth. One need only to seek out a trust company in Anguilla to learn about viable options. However, forming a private foundation serves two goals. It can offer both financial and spiritual benefits to founders.

How to Get Started

Just like forming an offshore company, a foundation begins with doing some research. You’ll probably want to start by hiring an experienced Trust Manager such as First Anguilla Trust Company Limited to guide you through the process and make sure you set up the foundation appropriately.

You’ll need to decide on the amount of the primary donation, how the money will be invested, and the vehicle for fund disbursal (either through directed activities or gifts to other charitable organizations). In addition, you must create bylaws, select a board of trustees, and set award criteria. You’ll also need a plan for managing funds.

Before you create a trust to protect your money, you have to find a reputable trust company in Anguilla to help you. The same principle applies to starting a private foundation. With proper guidance, you can ensure a successful undertaking.

Why Choose Anguilla?

One good reason to form an offshore private foundation in Anguilla is the relatively low costs. There could be any number of costs associated with forming and maintaining an offshore private foundation, depending on where you choose to set it up.

Foundations established in Anguilla require government registration fees of $500-700 US, plus annual $500 fees. You’ll also need a minimum of $10,000 to fund the foundation, as well as whatever fees are required by the agent handling the formation of the foundation.

Of course, you could pay a lot more to form and manage a private foundation elsewhere. In the U.S., for example, private foundations must pay an annual excise tax of 1-2% of earnings, which could amount to a lot more than a few hundred dollars.

Additionally, in Anguilla, you have the option of creating a Registered or Deposited Foundation. Foundations that pursue commercial trade and/ or have by-laws which provide for this are called Registered Foundations and details including purpose, assets, beneficiaries etc.must be entered in a public register. However, foundations that do not engage in commercial activity simply deposit the deed at the registry. Consequently, a high degree of privacy is provided.

In addition, those who form foundations in Anguilla can expect the same flexibility, confidentiality, security, and protection they receive from their trust company in Anguilla. This is good news for any individual, family, or business looking to ensure that their endowment is properly managed and that funds are granted according to their wishes.

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