FAQ's

A foundation is good finance. Contributions to a foundation are immediately tax-deductible and can fund charitable contributions through future years.  The donor remains in control over funds in the foundation, with the ability to invest money and let it grow tax-free, and give it to the causes of their choice over the course of many years.  A portion of salaries or endorsement fees may be paid directly to the foundation to reduce personal income tax liability.  Additionally, a properly organized and funded foundation can serve as a post professional career for the founder. 

A foundation is good business. Charitable leadership stimulates good will. Alliances with community organizations in the markets where celebrities/athletes perform can solidify relationships with business, sports team management, news media and fans.  A foundation can qualify the celebrity to be included in “cause marketing” campaigns that involve business corporations, news media and a selected cause, thereby further advancing the interests of the celebrity’s chosen cause.

A foundation is a good working platform. Once a celebrity’s foundation is established his or her representatives will have a ready-made vehicle in place to channel all requests for the celebrity’s time or donations.  All solicitations may be simply directed to the foundation. A foundation also performs all the administrative functions of collecting, managing and donating money under the direction of the foundation sponsor.

A foundation is a powerful way of doing well by doing good. The concrete demonstration of leadership in serving a cause satisfies the community and societal demands on high-earning sports and entertainment celebrities. Celebrities can both share their good fortune and serve as role models to leverage their own contributions into greater public support for the selected causes.

What a foundation is/is not.

A foundation is a not-for-profit charitable corporation that qualifies as a tax exempt charity under Section 501(c) of the Internal Revenue Code.   A properly organized and managed foundation provides a vehicle for an individual’s philanthropic purposes.

A foundation is not a means to gain a tax advantage and employ family and friends. However, a properly designed and managed foundation does provide the opportunity to apply tax law to the benefit of the foundation sponsor thereby creating a win-win situation for all parties involved.    In addition a properly organized, managed and funded foundation can lawfully achieve many collateral benefits, including employing family and friends, provided the compensation is reasonable for the services performed. 

What is a 501(c) corporation?

501(c) corporations are corporations that receive an exemption from federal taxation under Section 501 (c) of the Internal Revenue Code. These are typically referred to as non-profit corporations. Donations to these corporations are also tax deductible for the donor, making it easier for these organizations to raise funds. There are many classes of 501 (c) organizations that can qualify under the IRS code for tax-exempt status; the most common for foundations are those formed under Section 501 (c) (3). 

How do you form a 501(c) corporation?

As you will note under the Services section, we manage every aspect of your foundation from formation to management, fund-raising and charitable giving.  In order to become a 501(c) corporation, you must incorporate by filing articles with your state. After the corporation is in existence, you must prepare and submit your 501(c) application to the IRS. Once you have received this status, you need to comply with ongoing corporate formalities, such as holding board meetings and creating board minutes to discuss the business of the corporation. You will also need to review your corporate finances closely to make sure that you are in compliance with all the 501(c) regulations in accordance with charitable purposes as provided for under the IRS code.

What are the requirements to become a 501(c) corporation?

There are specific requirements to qualify to become a 501(c) corporation. Generally speaking, relative to private foundations, most are organized under Section 501 (c) (3) and in this regard there are three main requirements you must follow to qualify. The first is purpose: in order to be eligible for tax exempt status, the organization must be formed for a purpose that has been determined to serve the public good, such as charitable, scientific, religious or educational purposes. The second requirement is that the corporation must be non-profit. Therefore, any extra money cannot go to private interests, but must be reinvested to advance the purpose. In addition, no private party may be seen to have an excess benefit’ from its dealings with the 501(c)(3) transactions.  This dedication of the corporation’s money to the public cause is permanent – even if the corporation dissolves, any remaining money must be reinvested into the public cause or donated to another qualified tax-exempt organization. The last requirement is that the corporation must comply with certain restrictions on its political activities.

How much do I need to contribute to my foundation?

The amount contributed by the donor is entirely dependent on the goals and objectives of the donor and the foundation.  It can be a very small sum or it can be a substantial sum with the aim of maximizing personal income tax or estate tax deductions. 

A foundation can be created with very little capital.  There is no “right” amount of money.  Ultimately, this will all depend on the purpose of the foundation, its general cause and mission.  While many may say you need to fund a foundation with several hundreds of thousands of dollars, this is simply not true.  Those who profess this philosophy are generally motivated by their own personal interest, e.g. fee income.  At Thornton & Fathy LLP, money is secondary to the reasons to form or not to form a foundation.  The use of a foundation must take into consideration the individual situation of the founder.  For some, it may be tax driven, for others a deep concern for a specific public interest or cause.  Accordingly, the amount of initial funding will vary.  The important issue, however, is the ability of the foundation to attract outside third party funding to advance its interest.  Once established and a program is put in place to advance the foundation, funding from the founder is completely his or her decision.

How much time will be required?

The amount of time a celebrity/athlete elects to set aside in advancing the foundation is strictly a personal matter and must rest with the overall obligations the founder has with other business and personal commitments.  Formation and operation of a private foundation is just like any other business and requires the founding person to expend a certain amount of time to insure its ongoing success. Although much of the “time” commitment can be delegated to our firm relative to the operation and ongoing management of the foundation, the founder must be willing to provide the direction and interest in advancing the foundation’s purpose and mission.  To this end, the founder must commit to support the mission of the foundation and be willing to actively participate in decision- making board meetings, attend and special events and actively promote the objectives of the foundation to the public at large. 

In deciding to form a foundation or in the case where a foundation already exists but is not being managed properly, we will work with the celebrity/athlete and his or her designated representative to design a schedule that meets the founder’s needs.  Generally speaking, one can plan on devoting 3-4 days of board meetings and 10 -12 personal appearances at special events designed to enhance and raise additional funding to carry out the mission of the foundation.  A celebrity/athlete is free to decide just how much time he or she would like to devote.