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The Incorporated Foundation: A Unique Business Model for Self-Starters

| 8/23/2019 9:35:00 AM

Puzzling Pieces
Photo Courtesy of Pixabay

One of the biggest concerns for many foundations is the ability to provide a constant stream of funding to maintain and hopefully, to expand their operations. Without getting into name calling, some of the more well-known “charitable” foundations, use upwards of seventy to even ninety percent of all donations for “administrative fees” … largely for executive salaries and to seek out more sources of funding. The concept of the “Incorporated Foundation”, as a matter of full disclosure as much as anything else, was developed by the husband of the author, in cooperation with some — and opposition to others of his peers and cohorts. One of our current efforts is seeking out capital investors primarily for the purposes of establishing the very first of the “Incorporated Foundations."

What is an Incorporated Foundation?

In its simplest form, the Incorporated Foundation is originally established as a for-profit corporate entity. For the most part, these are not sustainable industries, but selected based on the need to provide at least a forty percent return of the principal amount per annum to the investors. The initial efforts will focus on the complete payment of any and all liabilities of the corporate entity; in this case, meaning paying off the original investors. At such a time as the corporate entity is free and clear of any pressing debts, (other than the normal costs of operations) the assets of the corporate entity will be leveraged in order to create asset backed securities which can then be traded. The proceeds of the corporate entity will serve as a guarantee of payment for said securities.

At this stage, a Faith Based Organization will be established if it is not already in existence. The faith in this case, is more of a philosophical approach to faith, based on the need of humanity to provide for one another, and to serve as stewards of the planet. The reasons it must be a Faith Based Organization are legal, insofar as donor and reporting requirements. It should be noted that in accordance with International Law, the regulations as established by the International Center for Not for Profit Law (ICNL) and domestic laws, the faith based organization is the only way to legally establish the groundwork for the final organization … the legal foundation of the foundation as it were.

Once the securities have reached their term or fully endowed, the Corporate Entity will be “donated” to the Foundation. Bear in mind that the corporate entity (and any and all others as shall be established) will continue to pay taxes in accordance with Generally Accepted Accounting Practices or GAAP … meaning that they will continue to pay taxes in the same way that they already have established, and at the same rates. At this point, the foundation itself will become the first tier of the overall organizational structure or the umbrella under which everything is united together.

Structure and of Incorporated Foundations

The Incorporated Corporate Entity will serve as one of two of the second tier of the organizational structure. The Foundation, as the majority shareholder, will rightly retain the majority of the proceeds generated, and the money will be donated to a private hedge fund which will serve as the other half of the second tier of the structural organization. It will be necessary in the opening phases of operations to utilize an outside hedge fund, though at such a time as enough of the incorporated infrastructure and viable business interests have been established, a private, foundation owned hedge fund will be formed for this purpose.

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