What is the difference between a private foundation and a public foundation?
A private foundation receives its funds through one donor or a small group of donors such as a family or a corporation. A public foundation receives its support from many donors.

What is the minimum payout requirement?
Private foundations generally have 12 months after the tax year in question to satisfy the minimum payout requirement. Please see the links below for more in-depth information, as the foundation decision-makers and tax preparer must consider other issues, such as "carryover."
   http://www.nng.org/ourprograms/campaign/calculate.htm

   http://www.cof.org/files/Documents/WebNotebook/Legal_Essentials.htm

What is a Family Foundation?
"Family foundation" is not a legal term, and therefore, it has no precise definition. Yet, approximately two-thirds of the estimated 44,000 private foundations in this country are believed to be family managed. The Council on Foundations defines a family foundation as a foundation whose funds are derived from members of a single family. At least one family member must continue to serve as an officer or board member of the foundation, they or their relatives play a significant role in governing and/or managing the foundation throughout its life. Most family foundations are run by family members who serve as trustees or directors on a voluntary basis, receiving no compensation; in many cases, second- and third-generation descendants of the original donors manage the foundation. Most family foundations concentrate their giving locally, in their communities. Reprinted with permission from the Forum of Regional Associations of Grantmakers.

What is an Independent Foundation?
An individual usually founds these private foundations, often by bequest. They are occasionally termed "nonoperating" because they do not run their own programs. Sometimes individuals or groups of people, such as family members, form a foundation while the donors are still living. Many large independent foundations, such as the Ford Foundation, are no longer governed by members of the original donor's family but are run by boards made up of community, business and academic leaders. Private foundations make grants to other tax-exempt organizations to carry out their charitable purposes. Private foundations must make charitable expenditures of approximately 5% of the market value of their assets each year. Although exempt from federal income tax, private foundations must pay a yearly excise tax of 1%-2% of their net investment income. The Ford Foundation and the John D. and Catherine T. MacArthur Foundation are two examples of well-known "independent" private foundations. Reprinted with permission from the Forum of Regional Associations of Grantmakers.

What is the difference between a family foundation and an independent foundation?
A family foundation still has at least one member of the family directly involved with the private foundation.

How much money do you need to start a private foundation?
There is no legal amount but a rule of thumb is that the foundation should be able to make grants of at least $25,000 per year. This could be from direct gifts as well as from endowment, which is often the case when a family starts a foundation with a small amount of money but intends to have it grow over time, such as at the death of the donor.

Is it better to have your own family foundation or a fund in a community foundation?
A donor should consider the costs of operating the foundation, the excise taxes the foundation is required to pay, and the legal 5% payout when considering the option of starting their own foundation versus having a fund in a community foundation. Other considerations include the desire to have control of the decisions and the level of interest other family members have in being involved with the foundation over time.

Can private foundations make grants to non 501(c)(3) nonprofit organizations?
Yes, but the foundation must assume expenditure responsibility to assure the grants are only used for a charitable purpose.

Can a family member be paid for working for the family foundation?
Yes, if the compensation is not excessive and if the services are reasonable and necessary for the foundation's exempt purposes.

Partial text reprinted with permission from the Forum of Regional Associations of Grantmakers.

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