How To Start A Foundation In South Africa
What is a Foundation?
A foundation is a category of nonprofit organization or charitable trust that typically provides funding and support for other charitable organizations through grants, but may also engage directly in charitable activities.
How To Start A Foundation In South Africa
Starting a private foundation generally consists of the following 12 steps:
- Define a philanthropic objective
- Create a mission statement
- Solidify grantmaking guidelines
- Hire a legal team and financial advisors for initial planning and ongoing compliance, recordkeeping and tax returns
- Establish a board structure and appoint board members or trustees
- Consider your personal time investment vs. hiring a staff to manage your foundation
- Determine if your foundation should cease or continue after your lifespan
- Form your foundation as either a trust or corporation under state law
- Apply for an employer identification number (EIN)
- Apply to the Internal Revenue Service (IRS) for recognition as a tax-exempt 501(c)(3) charity and to receive tax-deductible contributions
- File any additional required paperwork to obtain tax-exempt status from your state
- Follow IRS private foundation guidelines, including:
- Make grants worth at least 5 percent of your foundation’s investment assets each year
- Must provide grants only to other nonprofits or for educational scholarships
- Must pay up top a 2 percent excise tax on your foundation’s investment assets
With many steps involved, starting a private foundation can be harder than it looks. Beginning at square one requires exhaustive time and resources, not to mention expertise.
Many have found that even though they have managed to get their private foundation off the ground, maintenance costs are prohibitive. Resources can be quickly and significantly diluted by overhead and red tape, providing less funds for grantmaking than initially planned.
Frequently Asked Questions (FAQs)
Where can I register a foundation in South Africa?
You can submit your application at your nearest provincial Social Development office, post it to The Directorate, Non-profit organisations, Department of Social Development, Private Bag X901, Pretoria, 0001 or deliver it by hand to the Department of Social Development, 134 Pretorius Street, HSRC Building, Pretoria.
How much does it cost to start a foundation in South Africa?
How much does it cost to start a foundation in South Africa? Initial set-up costs of a foundation are between R10 000 and R20 000.
How do I start a foundation with no money?
One way of starting a nonprofit without money is by using a fiscal sponsorship. A fiscal sponsor is an already existing 501(c)(3) corporation that will take a new organization “under its wing” while the new company starts up.
Who can a private foundation give money to?
Private foundations can give to any organization recognized by the Internal Revenue Service as a public charity. This includes churches and synagogues, educational, scientific and cultural institutions, poverty relief agencies or any other organization that qualifies as a 501(c)(3) charity according to the IRS.
Can foundations raise money?
Yes—a private foundation can raise money from “outsiders”, including family friends, company vendors and employees. A private foundation is a section 501(c)(3) organization, and while private foundations have special rules, no rule prohibits the organization from receiving charitable contributions.
How do I get funding for an NPO in South Africa?
Funding for NPO in South Africa, get their income donations from donors, sponsorship from individuals or corporations, funding from the government, investments, fundraising services, and product sales.
How does a CEO of a nonprofit get paid?
We found that nonprofit CEOs are paid a base salary, and many CEOs also receive additional pay associated with larger organizational size. Our results indicate that while pay-for-performance is a factor in determining compensation, it is not prominent.
How does a foundation make money in South Africa?
These organizations earn revenue from activities like selling tickets, or by charging admission or other fees for the charitable services they provide. These public charities fall under Section 509(a)(2) of the Internal Revenue Code.
Do foundations pay taxes?
Amounts that are received by the foundation, or which are paid by the foundation to participants or volunteers, are not reported for tax purposes.