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.
Future corporate entities incorporated into this foundation will be more primarily concerned with matters of development that are more sustainable in nature. Many if not all of these business interests are financially viable and will not require subsidies or other assistance to maintain their economic sustainability. These corporate entities will further serve to provide training and paid employment to the formerly indigent and other underclass individuals who are receiving assistance from the foundation. As the financial viability of the incorporation increases to sufficient levels, the less ideal and less sustainable operations will be decommissioned and closed, replaced where necessary with more sustainable operations.
Essentially, the only difference between this and the current operations of incorporated business entities under the basic principles of incorporation, is that the foundation will serve as the majority shareholder and recipient of the proceeds. These proceeds will then be reinvested in a private hedge fund, not only to increase the earnings potential, but also to “remove” the funds to a sufficient distance to be utilized to subsidize social, infrastructural and environmental operations within the Isolated Community Service Centers and Community Developments and within other organizations who may be partnered in other endeavors regarding sustainable development.
Business Model and Benefits
Obviously, in the early phases of growth and development, there will not very likely be any fully established Isolated Community Service Centers, much less full Community Developments, but these can then be built utilizing the matured funds to be distributed by the Hedge Fund. As more corporate interests are created, more proceeds will be invested in the hedge fund, and more monies will be made available for humanitarian pursuits, all without the need to financially punish the productive, contributing members of these social developments.
Taxes from the corporate entities will be paid in accordance with GAAP for all domestic and international tax laws and the foundation itself will function in much the same way as any other foundation. The one notable exception being that it will have numerous corporations that it owns, which will provide a continual source of income — or donations — without the foundation being required to actively spend vast amounts of money constantly seeking new sources for vast amounts of funding. Proceeds from the corporate interests will then be leveraged through the hedge fund, allowing for even more funds to be made available to fund continued growth and expansion of operations.
Furthermore, these corporate entities will also provide an invaluable resource in terms of vocational and technical training for students, in addition to providing paid jobs for graduates of these programs. These people will be selected largely from the local indigent and from among other underclass citizens, providing all of the requisite assistance and training while they learn and adapt to reintegration into “normal” society as productive and contributing members of that social order. Current estimates show that the integration of ten to fifteen percent of the work force from the formerly indigent class will be wholly sustainable from a business standing. However, these points lead to a host of additional, unique articles which will hopefully be well received over the course of time as they are written and published, either here or on the website of the author.
As always, please leave any of your thoughts, comments, questions and suggestions in the comment section below so that they can be addressed individually, and perhaps even used for consideration in future articles. None of this work would be possible without you, the reader, and as such, your thoughts and considerations are the most important aspect of any articles published herein.
Ruth Tandaan Sto Domingo has worked with numerous NGOs, governments and Indigenous communities in Guinea, Cameroon, Nigeria, Panama, Costa Rica, Brazil, Australia, the Philippines and Vanuatu to implement sustainable solutions. She is the co-author of Whole System Sustainable Development. Ruth enjoys “hyper-realistic” cross stitch and is working with her husband to build a largely off-grid and self-sufficient home where she will raise livestock and garden both flowers and food. Read all of her MOTHER EARTH NEWS posts here.
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