Foundation (non-profit)

Foundation (non-profit)

A foundation (also a charitable foundation) is a legal categorization of nonprofit organizations that will typically either donate funds and support to other organizations, or provide the source of funding for its own charitable purposes.

This type of non-profit organization differs from a private foundation which is typically endowed by an individual or family.



One of the characteristics of the legal entities existing under the status of "Foundations", is a wide diversity of structures and purposes. Nevertheless, there are some common structural elements that are the first observed under legal scrutiny or classification.

  • Legal requirements followed for establishment
  • Purpose of the foundation
  • Economic activity
  • Supervision and management provisions
  • Accountability and Auditing provisions
  • Provisions for the amendment of the statutes or articles of incorporation
  • Provisions for the dissolution of the entity
  • Tax status of corporate and private donors
  • Tax status of the foundation

Some of the above must be, in most jurisdictions, expressed in the document of establishment. Others may be provided by the supervising authority at each particular jurisdiction.

Foundations in civil law

The term "foundation," in general, is used to describe a distinct legal entity.

Foundations as legal structures (legal entities) and/or legal persons (legal personality), may have a diversity of forms and may follow diverse regulations depending on the jurisdiction where they are created.

In some jurisdictions, a foundation may acquire its legal personality when it is entered in a public registry, while in other countries a foundation may acquire legal personality by the mere action of creation through a required document. Unlike a company, foundations have no shareholders, though they may have a board, an assembly and voting members. A foundation may hold assets in its own name for the purposes set out in its constitutive documents, and its administration and operation are carried out in accordance with its statutes or articles of association rather than fiduciary principles. The foundation has a distinct patrimony independent of its founder.

Foundations are often set up for charitable purposes, family patrimony and collective purposes.


Foundations in Finland must have state approval and register at the National Board of Patents and Registration within six months from its creation. A minimum capital of € 25,000 is obligatory. A foundation can be created with any legal purpose and may have economic activity if this is specified in its Bylaws and the business supports the foundation's purpose.


There are not many Foundations in comparison to the rest of Europe. In practice public administration requires at least €1 million is considered necessary. States representatives have a mandatory seat in the Board. [1]


German regulations allow for the creation of any foundation for public or private purposes in keeping with the concept of a gemeinwohlkonforme Allzweckstiftung. Commercial activities should not be the main purpose of the foundation, but they are permitted if this serves the main purpose of the foundation. There is no minimum starting capital, although in practice at least €50,000 is considered necessary.

A German foundation can either be charitable or serving private interest. Charitable foundations enjoy tax shelter and can at the same time be engaged in commercial activities, if so only the commercially active part of the entity is taxed. A family foundation (serving private interest) is taxed like any other legal entity. There is no central register for German foundations.

Only charitable foundations are subject to supervision of state authorities. Family foundations are not supervised after establishment. All forms of foundations can however be eliminated if they pursue anti-constitutional aims. Foundations are supervised by local authorities within each state (Bundesland) due to the fact that each Bundesland has exclusive legislative power over the laws governing foundation.

In contrast to many other countries, German law allows a tax sheltered charitable foundation to distribute up to one third of its profit to the founder and the next of his kin, if they are needy, or for maintenance of the founder's grave. These benefits are subject to taxation.

As of 2008, there are about 15,000 foundations in Germany, about 85% of them are charitable foundations. It is notable that more than 250 charitable German foundations have existed for more than 500 years, the oldest dates back to 1509. Although there are so many charitable foundations, there are also large German corporations owned by foundations, e.g. Bertelsmann, Carl Zeiss AG or Lidl.

Foundations are the main providers of private scholarships (Stipendien) to German students.


In Italy, a foundation is a private non profit and autonomous organisation, its assets must be dedicated to a purpose established by the founder. The founder cannot receive any benefits from the foundation or have reverted the initial assets. The private foundations or civil code foundations are under the section about non commercial entities of the first book (Libro Primo) of the Civil Code of Law (Codice Civile) from 1942. The Art. 16 CC establishes that the statutes of the foundation must contain its name, purpose, assets, domicile, administrative organs and regulations, and how the grants will be distributed. The founder must write a declaration of intention including a purpose and endow assets for such purpose. This document can be in the form of a notarised deed or a will. To obtain legal personality, the foundation must enroll in the legal register of each Prefettura (local authority) or some cases the regional authority. There are several nuances in requirements according to each foundation's purpose and area of activity.


See private foundation in the Netherlands.


Foundations in Spain are organizations founded with the purpose of not seeking profit and serving the general needs of the public. Such foundation may be founded by private individuals or by the public. These foundations have an independent legal personality separate from their founders. Foundations serve the general needs of the public with a patrimony that funds public services and which may not be distributed to the founders' benefit.


A foundation in Sweden (Stiftelse) is a legal entity without an owner. It is formed by a letter of donation from a founder donating funds or assets to be administered for a specific purpose. When the purpose is for the public benefit, a foundation may enjoy favourable tax treatment. A foundation may have diverse purposes, including but not limited to public benefit, humanitarian or cultural purposes, religious, collective, familiar, or the simple passive administration of funds. Normally, the supervision of a foundation is done by the county government where the foundation has its domicile, however, large foundations must be registered by the County Administrative Board (CAB), which must also supervise the administration of the foundation. The main legal instruments governing foundations in Sweden are the Foundation Act (1994:1220) and the Regulation for Foundations (1995:1280).

Foundations in common law


Under Canadian law, foundations may be public or private, but both are charities. They collectively comprise a large asset base for philanthropy


The law does not prescribe any particular form for a foundation in Ireland. Most commonly, foundations are companies limited by guarantee or trusts. A foundation can obtain a charity registration number from the Revenue Commissioners for obtaining tax relief as far as they can be considered under the law on charity, however, charitable status does not exist in Ireland. The definition usually applied is that from the Pemsel Case of English jurisprudence (1891) and the Irish Income Tax Act 1967. Trusts have no legal personality and companies acquire their legal status through the Company law and the required documents of incorporation. Foundations are not required to register with any public authority.


The States of Jersey are considering introducing civil law type foundations into its law. A consultation paper presenting a general discussion on foundations was brought forth to the Jersey government concerning this possibility. adopted by the states of Jersey 22 October 2008 - Foundations (Jersey) Law 200-

United Kingdom

In the UK, the word "foundation" is sometimes used in the title of a charity, as in the British Heart Foundation and the Fairtrade Foundation. Despite this, the term is not generally used in English law, and (unlike in civil law systems) the term has no precise meaning. Instead, the concept of Charitable Trust is in use (for example, the Wellcome Trust).


In the United States, many philanthropic and charitable organizations are considered to be foundations. However, the Internal Revenue Code distinguishes between private foundations (usually funded by an individual, family, or corporation) and public charities (community foundations or other nonprofit groups that raise money from the general public). While they offer donors more control over their charitable giving, private foundations have more restrictions and fewer tax benefits than public charities.

See also


Further reading

  • Dwight F. Burlingame, Philanthropy in America: A Comprehensive Historical Encyclopedia, Santa Barbara, Calif. [etc.] : ABC-CLIO, 2004
  • Mark Dowie, American Foundations: An Investigative History. Cambridge, Massachusetts: The MIT Press, 2001.
  • Lester Salamon et al., "Global Civil Society: Dimensions of the Nonprofit Sector", 1999, Johns Hopkins Center for Civil Society Studies.
  • David C. Hammack, editor, "Making the Nonprofit Sector in the United States", 1998, Indiana University Press.
  • Joan Roelofs, Foundations and Public Policy: The Mask of Pluralism, State University of New York Press, 2003, ISBN 0791456420

Further listening

  • Joan Roelofs, The Invisible Hand of Corporate Capitalism, Recorded at Hampshire College, April 18, 2007. [1]

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