Before you start a foundation, you need to establish whether the foundation will be private or public. You also need to define the foundation's purpose and goals. Finally, you have to determine the following information:

  • The names of all members of the foundation and their specific roles and responsibilities
  • The name(s) of the donor or donors who will provide the foundation's initial capital
  • The resources the foundation will use to keep itself afloat
  • The names of prospective board members and officers
  • The managerial and administrative duties you will fulfill, and the names of those to whom you plan to delegate the remaining duties
  • The amount of control you will have over the funds
  • The relevant tax issues

[source: Foundation Requirements]

Once you have this information, follow these steps to start the foundation [source: Start a Foundation]:

  1. Check what state laws and requirements you need to comply with.
  2. Create a board of directors. Define each board member's function and responsibilities.
  3. Develop bylaws and a mission statement.
  4. Hire an experienced accountant and attorney.
  5. Incorporate your foundation.
  6. Apply to the IRS for tax-exempt status. This may be the most time-consuming step. You will need to provide the IRS with a statement of planned activities and a three-year budget estimate.

Be sure to keep detailed records of the following:

  • Keep a record of all board meetings.
  • Keep a record of all income, expenditures and donations.
  • Keep a record of all contracts and insurance policies.