How Do Foundations Work?

Foundations are charitable organizations that can either be funded privately by individuals or by a single organization. Some foundations are public charities and are funded by communities for the benefit of the public. When charities are private, they face more restrictions than publicly funded ones.

These private entities are required by law to give five percent of their total assets as charitable grants and other charity activities. These companies generally do not pay taxes; however, this differs from state to state. In recognition of their willingness to act voluntarily for the benefit of the less fortunate, it is agreed that they don’t need to also support the government by paying taxes.