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Life Cycle of a Private Foundation - Starting Out

The first stage in the life cycle of any organization is its creation. A nonprofit organization may be created as a corporation, a trust, or an unincorporated association. Any of these entities may qualify for exemption. Note, however, that a partnership generally may not qualify.

To qualify for exemption under section 501(c)(3), an organization must be organized exclusively for purposes described in that section. This means, among other things, that the organization’s organizing document must contain certain provisions. The IRS provides sample organizing documents that contain the required provisions.  To help ensure that your organizing documents comply with the requirements for exemption, you can seek help from the IRS.  In order to file for recognition of tax-exempt status, you must apply for and receive an employer identification number even if you do not have employees (see below).  And though not necessarily required under federal tax law, most organizations adopt by-laws (see below).

Organizing Documents

The trust instrument, corporate charter, articles of association, or other written instrument by which the organization is created under state law.


By-laws are an organization's internal operating rules.  State law may require nonprofit corporations to have by-laws, and nonprofit organizations generally find it advisable to have internal operating rules.  Federal tax law does not require specific language in the by-laws of most organizations.  For additional information on state law requirements, you may want to contact your state officials.

Employer Identification Number

Every foundation must have an employer identification number, even if it will not have employees.  The employer identification number is a unique number that identifies the organization to the Internal Revenue Service.  Please note that the employer identification number is not your “tax-exempt number”.  That term generally refers to a number assigned by a state agency that identifies organizations as exempt from state sales and use taxes.  You should contact your state revenue department for additional information about “tax exempt numbers”.

To apply for an employer identification number, you should obtain Form SS-4 and its Instructions. You may also apply for an employer identification number on-line.  For additional information about employer identification number application procedures, see Question 4 of FAQs regarding Applying for Tax Exemption.

Types of Private Foundations

In general, a private foundation is any section 501(c)(3) organization that is not in one of the categories of public charities specifically excluded from the definition of that term.  Some tax law provisions apply to all private foundations. Others, however, are more narrowly focused on particular types of private foundations.  For tax purposes, it may be necessary to distinguish between the following types of foundations:

Charitable Solicitation

Most states require charitable organizations to register with one or more state agencies before soliciting contributions within the state.  Organizations must typically file reports with the state supervising agency, including a copy of IRS Form 990-PF.  For more information, including how to determine in which states registering may be required, see the website of the National Association of State Charity Officials.

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