The Business of Starting a Charitable Foundation

Many have a passion to make a difference in the world – but the path to actually doing so isn’t without its challenges. Philanthropy is a vast and often confusing landscape: from the importance of a defined, cohesive giving strategy to the functional brass tacks of establishing a giving methodology, there’s a lack of clear understanding and accessible resources when it comes to making an impact.

We sat down with Los Angeles-based philanthropist Janine Lowy to discuss the business of establishing a charitable foundation. Lowy drew on her experience as founder of the Winkler-Lowy Foundation to offer her best advice on navigating regulatory hurdles, creative ways to executive large gifts, and establishing a strategy to maximize your efforts.

Regulatory Requirements

“One of the foremost barriers to entry in the realm of foundations is the complex regulatory requirements,” said Lowy.

Depending on jurisdiction and foundation type, there are an array of requirements to fulfill. Securing 501(c)(3) “tax-exempt” status for your organization is only the beginning – you will face seemingly endless governing documents and reporting obligations each year. Navigating these legal waters demands a keen understanding of regulatory frameworks and often necessitates professional legal counsel to ensure compliance.

“Many people aren’t aware of the resources that already exist to address these challenges,” said Lowy. “You don’t need to manually assemble a team of lawyers and philanthropic advisors. There are organizations that exist solely to support the unique needs of charitable foundations.”

Lowy recommends Foundation Source, which offers industry-leading technology and a suite of administrative, compliance and advisory solutions. “Foundation Source has been a pivotal resource for the Winkler Lowy Foundation,” she said.

Strategy

Your foundation should be built on a clear mission and run with a defined strategy. Articulate a compelling impact statement and outline your plan. “Treat your goal to make an impact the same way you would run a business,”  Lowy said. “Leverage data to improve your work; build deep relationships with partners; keep learning and adjusting your strategy.”

The process doesn’t end once a gift is executed. “It is crucial that donors follow through to monitor and evaluate the impact of their giving proactively. If an effort is falling short, partner with the nonprofit to do as much as possible to get the initiative back on track.” Whether you connect them with someone who can offer relevant expertise, or you ultimately need to up your donation, stay involved, she said.

Financials

It goes without saying that establishing a solid financial base is paramount to long-term success. This may require a strategy for ongoing fundraising and financial management.

“Passion and altruism are key, but don’t lose sight of what it takes to achieve your tactical goals,” said Lowy. Surround yourself with a support network that goes beyond financial experts and legal counsel. Leveraging your network and forging partnerships with other charitable organizations can both amplify the impact of a foundation’s efforts and open doors for new opportunities.

When it comes to executing gifts, Lowy reminds us that there’s room to get creative. “If you have a large donation on the horizon, your foundation doesn’t always need to pay out of pocket with cash,” she adds. “You might not realize you have a portfolio of assets available to support your mission.” Advisors can help you explore alternative avenues to unlock additional resources, ensuring you make the greatest impact with your dollars and protect your financial base for sustainable long-term giving. For example, some foundations opt to gift appreciated stock (which also provides its own advantage to the recipient.)

External Engagement

“Whether your foundation benefits from a robust comms strategy or your work is better suited to one-on-one discussions with grantee organizations, communication is key to building trust with stakeholders and maximizing impact,” Lowy said. By engaging with their communities and soliciting constructive feedback, foundations big and small can cultivate meaningful relationships that will help them drive positive change in the world.

While the journey of establishing a charitable foundation might appear challenging at the onset, there are far more resources available than many realize. Navigating regulatory complexities, ensuring sustainable funding, and embracing strategic partnerships lay the groundwork for aspiring philanthropists to effect change. “With the right resources, vision, and determination,” she concludes, “the business of starting a charitable foundation can truly be a force for good in the world.”

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