Friday, June 8, 2012


Build a strong foundation and increase your company's bottom line...

I know, It sounds cliché and I'm certain you've heard it before through a Tony Robbins seminar. However, this blog post isn't going to be a discussion of how you can strengthen your inner self, nurture your positive alter ego, or even get all your employees to say "WOW, our boss is the best leader any worker bee could ever have!"

No boys and girls, I'm talkin about building an actual 501(c)(3) nonprofit, tax-exempt foundation and using this foundation not only for the greater good, but also to build contacts, develop relationships and as a consequence create sales for your company. 

A 501(c)(3) status is an IRS classification. The RS defines a 501(c) (3) as follows:

"To be tax-exempt under section 501(c)(3) of the Internal Revenue Code, an organization must be
organized and operated exclusively for exempt purposes set forth in section 501(c)(3), and none of its earnings may inure to any private shareholder or individual. In addition, it may not be an action organization, i.e., it may not attempt to influence legislation as a substantial part of its activities and it may not participate in any campaign activity for or against political candidates. Organizations described in section 501(c)(3) are commonly referred to as charitable organizations. Organizations described in section 501(c)(3), other than testing for public safety organizations, are eligible to receive tax-deductible contributions in accordance with Code section 170."

The exempt purposes set forth in section 501(c)(3) are charitable, religious, educational, scientific, literary, testing for public safety, fostering national or international amateur sports competition, and preventing cruelty to children or animals. The term charitable is used in its generally accepted legal sense and includes relief of the poor, the distressed, or the underprivileged; advancement of religion; advancement of education or science; erecting or maintaining public buildings, monuments, or works; lessening the burdens of government; lessening neighborhood tensions; eliminating prejudice and discrimination; defending human and civil rights secured by law; and combating community deterioration and juvenile delinquency.

Thus, under this classification, one can form a foundation that can relate to their business but the basis of the foundation must have a charitable purpose.

For example, I'm an attorney that practices business law. However, I am planning on forming a foundation that will help wounded soldiers coming home from Iraq and Afghanistan with starting their own high-tech entrepreneurial venture.

This foundation would have both a charitable and educational purpose and would meet the requirements of a 501 (c)(3). The foundation would certainly be able to receive tax-deductible contributions and it would be able to provide not only legal services to these veterans to start their own business but also provide professional business services as well.

More importantly, many entrepreneurs who currently own start-up technology companies would likely have an interest in serving on the board of this foundation or to serve in an advisory capacity because of the altruistic and honorable nature of the foundation's mission.

By working with this group of board members and advisers over time I will develop a relationship and understanding of their own business needs and concerns. This of course has the potential to create new business for me down the road and as we all know, sales is all about who you know and who knows you.

Forming a 501(c)(3) foundation is a lot like forming any new business organization. The foundation can be a Corporation, LLC, Trust, Unincorporated Association, or Corporation Sole (not worth going there).

However, the organization must be carefully formed and the proper IRS documents must be paid attention to because receiving a tax exempt status can be a bit difficult and will likely take up to 27 months. Also, like any for-profit corporation, one must observe the fiduciary duties owed to the other board members, advisers, and outside individuals and entities.

Finally, if you are going to move forward on creating a nonprofit foundation you MUST get with an attorney and a tax advisor to make certain you maintain IRS compliance right out of the gate. For example, a pivotal form that must be filled out properly during the formation of your nonprofit and each and every year thereafter is IRS form 990. IRS form 990 used to only focus on financial issues. However, starting this year, IRS form 990 has materially changed and the iris is now focusing on areas like: conflict of interest, foreign activities, governing structure, exactly with the organization is doing and how it is doing it. 

Here is a brief video that gives you a better understanding of the compliance issues as it pertains to starting a foundation. 

So there you have it, build the foundation and the world will beat a path to your door... Just make sure you build your foundation with a strong foundation to support your foundation....( or something like that)...

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