Company Registration Worldwide’s guide on what is a Private Foundation and how to register a Foundation

Foundations have been an integral part of the global economy ever since their initial use over a century ago. Since then, not only their use but their size has increased. Unfortunately, it has become rather apparent that they are not being utilized to their maximum potential, primarily due to a lack of information. As such, here is a closer look at foundations and the many benefits they entail.

The Essence of Private Foundations

To put it simply, foundations are a type of company that inherently allows you to become a legal entity in any economic process or operation. This is ideal when only the founders want the primary decision-making power. The most commonly used type of foundation is known as a private foundation.

Private foundations can be categorized and isolated into 2 rather distinct categories. The first category is a local private fund, where money is never solicited from the local public. Instead, money is usually solicited from private parties and entered into a private account. Possibly the most well known private foundation is the Bill & Melinda Gates Foundation, a foundation with almost $40 billion in assets.

The second category of private foundations is known as an offshore private foundation, where assets are usually placed in an offshore account by private entities. This helps protect beneficiaries against any unfortunate uncertainties that may surface in their local country. Moreover, it enables easy asset transference to heirs, allowing the legal entities to bypass local laws that may prohibit them from doing so.

Moreover, were someone to establish a foundation with 2 other members, only the decision of the members would stand supreme. This is because foundations, irrespective of their size or nature of business, are not run by a board of directors or equivalent.  This can make them ideal for the division and structuring of family assets.

The Requirements for a Foundation

When getting into foundations, it is vital that you have the right reasons to do so. The most common benefits of foundations are:

  • Charter – A Foundation is generally established by a charter submitted to the relevant registrar and on the issuance of a certificate of registration. This is the document similar to a Constitution or Memorandum & Articles of Association which governs the legal entity – similar to Private Limited Companies.
  • Objectives – The objects of a Foundation may be charitable, non-charitable or both and shall include the management of its assets and income, and the distribution thereof, as the council may by a resolution of councillors determine pursuant to the charter or regulations.
  • Assets of the Foundation – The Foundation must have a minimum of US$1 as initial assets (§8). The assets of a Foundation may originate from any lawful source and consist of present or future assets of any nature (§9). Where a founderor any other person has made an undertaking, recorded in the charter or other document, to endow assets to a Foundation, the Foundation may enforce that undertaking against the founder or such other person, as the case may be assets always belong to the company that holds them. However, with a foundation, the assets are the property of the founders.
  • Foundation Council – A Foundation shall have a council which consists of one or more persons. The duties of the council shall be to carry out the objects of the Foundation; to manage and administer the assets of the Foundation; and to do such other acts as may be provided by the charter, regulations and the relevant Foundation legislation.The Foundation Council is the most important administrative organ of a Foundation. Members of a Foundation Council have no personal title to a Foundation’s property, either as individuals or jointly as a body, and with no personal liability in the absence of fraud or negligence for any breach of that Foundation’s obligations. These features appear to make the Foundation Council similar to Board of Directors of a registered company but Foundation Council members have no shareholders or equivalent body of investors to whom they are answerable.

The Benefits of Foundations

When getting into foundations, it is vital that you have the right reasons to do so. The most common benefits of foundations are:

  • Wealth Protection – In times of national crisis, it is crucial that any business entity is protected from harm. Offshore foundations protect you from a number of economic harm such as political, economy and domestic instability.
  • Global Establishment – When companies want to establish a global presence, foundations help make the process easier and, in many cases, possible.
  • Increased Autonomy – Assets always belong to the company that holds them. However, with a foundation, the assets are the property of the founders.
  • Easy Asset Transference – If you have assets in a company, transferring them can become rather difficult. When you set up a foundation, the assets always belong to the founders and can be transferred to whoever the founders wish.

As such, foundations represent a large and growing economy where individuals, or a group of individuals, can easily create a company remain its only legal beneficiaries. With 3 different types of Foundations and so many benefits, you stand to substantially gain with this type of  company.

Company Registrations Worldwide can assist you in registering a foundation in some of the most popular offshore centres in the world. We would recommend the Seychelles and Mauritius as being the easiest and most cost effective jurisdictions in which to establish a foundation. Other jurisdictions such as Canada and Guernsey have new legislation governing Foundations to help attract them. For a free consultation please call +353 1 6874518 or alternatively complete our web enquiry form on our ‘contact us’ page.