Structuring of a Philanthropy

Grand Rapids and Traverse City Lawyers Skilled in Business Formation

Setting up a private philanthropic foundation in Michigan may go more smoothly with the help of an experienced attorney. Generally, a private foundation is a nonprofit corporation or a charitable trust created by a donor. The donor may keep personal control and flexibility over how the foundation gives to others. Often, family members are on the governing board of private foundations. The purpose of the foundation’s grant-making may be as narrow or broad as you choose. At the Neumann Law Group, our Grand Rapids and Traverse City business attorneys can help you structure a philanthropy.

The Process of Structuring a Philanthropy

Charitable private foundations are often structured as nonprofits or charitable trusts. If they are structured as nonprofits, they must meet various requirements set forth under Michigan law and then apply for 501(c)(3) status under the Internal Revenue Service Code. Unlike public charities and other types of nonprofits, they do good by giving money to other organizations. Tax advantages for tax-exempt organizations include tax deductions of up to 30% of the annual adjusted gross income for cash donations. Gifts that are made in a single year that are greater than the limit may be moved forward for deduction purposes for five years.

Since funds are invested and income is paid on an annual basis in grants, the giving may last as long as the foundation does. The funds may be invested to ensure a foundation’s growth. Generally, private foundations must pay funds that equal 5% of their assets on a yearly basis. They need to pay 1-2% in taxes on net investment income.

If a pass-through foundation is created, all of the contributions received each year, rather than only 5%, may be distributed to recipients. Alternatively, if a private operating foundation is created, it will use most of its income to run charitable programs and staff the foundation.

Generally, if your organization solicits or gets contributions in Michigan, it will need to register under the Charitable Organizations and Solicitations Act. The law requires professional fundraisers to be licensed and bonded before soliciting, planning, or developing any sort of solicitation campaign for a charitable organization. Certain organizations, such as those that only use volunteers and get less than $25,000 per year, are exempt.

Charitable trusts are created when a charitable entity or trustee is entrusted with assets that are supposed to be used for a charitable purpose. They exist whenever there is a relationship in which the trustee holds the property to be used for charitable goals for the public’s benefit. All charitable trusts must register with the Michigan Attorney General under the Supervision of Trustees for Charitable Purposes Act. If you are a charitable organization registered to solicit under the Solicitations Act, the Charitable Trust Section will automatically register you. If not, you need to submit a registration form. You will need to file financial accountings that include the IRS accounting, a certified audit, or an annual financial statement with the Charitable Trust Section after each fiscal year, within six months. You may get a waiver under certain circumstances. When a charitable trust is created by a will, the Attorney General becomes an interested person for the purposes of probate.

Consult a Traverse City or Grand Rapids Attorney When Structuring a Philanthropy

Many legal issues may arise during the formation of a philanthropy. At the Neumann Law Group, we may be able to assist you in structuring the philanthropy and addressing any subsequent concerns. Our Traverse City and Grand Rapids lawyers also represent clients in Ann Arbor, Flint, Lansing, Kalamazoo, Detroit, Wyoming, Saginaw, Muskegon, Midland, Holland, Warren, and Petoskey, as well as communities throughout the Upper Peninsula. Contact the Neumann Law Group at 800-525-NEUMANN or via our online form to set up an appointment. We also can counsel businesses that need a food license attorney or assistance with handling other needs.