Would you like to help people? Are you a charismatic, caring person with many projects in mind? Have you ever dreamed of a foundation but you don’t know how to do it? We help you make your dreams come true. Know the Requirements to create a Foundation.
What is a Foundation? What is it for?
A foundation is a private, non-profit, non-governmental organization. It has a main patrimony, constituted with the purpose of attending social needs.
In addition, its two main functions are to channel financial donations to individuals. Also to non-profit organizations and other entities. As well as providing services, conducting research, organizing conferences, and publishing.
That is, it seeks to raise private funds for general interests, especially for issues such as social justice.
Likewise, projects of long duration in time and in risky actions.
Now, we know that there are many ways to help, and foundations are a perfect way to do it. Whether you have a defined aid plan or simply want to attend, we show you the step by step to legally establish a foundation.
What does it take to create a foundation?
To create a Foundation you need to follow several steps and be aware of some important points such as:
- You must have the name, identification and address of the associates or founders.
Foundations can be constituted by one or more people.
- Think of an entity name.
- Class of legal person.
- Activity to which it will be dedicated.
- The patrimony and the way to make the contributions.
- You must obtain the Tax Identification Number NIT
Steps to create a foundation
- The first thing you should do is determine the type of foundation to create.
That is, consider your idea to develop, evaluate if it is worth filling that market niche.
- The goal of a foundation is to help a specific community. Seeks to contribute to its improvement and not receive monetary benefit for this activity.
- Even if it does not receive money, a foundation manages financial resources and can present economic surpluses from donations or reinvestments.
- Among the most common causes for which a foundation is established are to support and empower low-income communities or groups of people with a common purpose.
- Foundations can be created by public bodies to generate and promote development models and public policies that benefit the general population.
- They can also be established by companies that have the interest or need to generate social responsibility strategies.
- Define your goals.
Once you have clear the main objectives to create the foundation, it will be much easier to carry it out.
- You must have a real will to help. Without this first requirement, no foundation will be able to carry out its plans and projects in the best way.
- Be clear about the problem to be solved and know which social group this help can reach.
- Identify the social causes and the human component that can benefit from the creation of the foundation.
- Seek advice.
- Determine the patrimony that the foundation will have. Every foundation has the legal obligation to have an established patrimony that can ensure its existence, as well as an economic model with which it can carry out its business name.
- Also, it determines the income that the foundation will obtain, the economic activities that it can carry out and the ways in which it can spend or invest the profits.
- Specify the number of people who will constitute the foundation.
- Take into account your obligations.
When you create a foundation, you enter into a contract that involves certain responsibilities and administrations.
- You must submit detailed reports each time the body that exercises control over your foundation asks you to do so.
- You must make public the statutes that make up your foundation and make them available to the control and surveillance body.
- If there are changes in the statutes you must inform said body.
- The books of your foundation must also be fully available to the control and surveillance entity.
- Every year, you must submit the financial statements of the foundation. As well as the management reports and the execution of the budget for the year that ends and the one that begins.
As we said before, a foundation can have several partners.
In order to fulfill the objective of the foundation, it is necessary that you establish in time who the affiliates will be.
Once you have them, you must immediately go on to draft the constitutive act of the foundation as well as its statutes.
Constitutive Act and Statutes
- Draft the charter of the foundation.
In this document all the founding members of the new organization express in writing their desire to create the foundation. It is written by a lawyer and must have several points:
- The minutes must contain the name of the foundation.
- Also, the corporate purpose and its assets.
- Name, surname, address and nationality of the members who wish to legally establish the foundation. If they are legal persons, the record must include their business name.
- The express desire to establish the foundation in writing.
- The proof of the approval of the statutes.
- Any type of agreement that exists between the members of the foundation and that may have an effect on its operation.
- The election of a legal representative and a tax auditor with their functions clearly described.
- The place and date on which the founding act is designated with the due signatures of the founding members and the representatives of legal entities.
That is, basically the place, date and time of the assembly must be established. Also, identify the associates and the signatures of those who associate, the president and the secretary of the meeting.
On the other hand, a Statute are the internal rules by which the foundation will be governed.
The minutes must also include the statutes with which the foundation is going to be governed.
They are permanent, unless it is necessary to modify them so that they can regulate new needs.
- The statutes must include the corporate purpose of the foundation and describe its objectives and purpose.
- Name and duration of the foundation. That is, name and term of validity.
- The address of the foundation.
- The structure and functions of the administrative and management bodies. You must explain how the foundation will be managed (board, assembly or council), if there is going to be a president, who will be part of this administration and their functions and obligations.
- The enumeration of the control and inspection bodies. Foundations usually have tax auditors who monitor assets and monetary liabilities.
- The choice of a legal representative.
- The detailed description of the rights, duties and prohibitions that the founders, associates, adherents and honoraria have with the foundation.
- The disposition on the patrimony. The patrimony of the foundation must be explained in detail.
- Detail how the assets will be disposed of and the destination of the income.
- The environment where the foundation plans to establish itself.
- Forms of election of the administrative body.
- Procedure for the dissolution and liquidation of the foundation.
The Foundations to be created in Bogotá can take a draft of the Statutes to the Office of the District Directorate for Inspection, Surveillance and Control of Non-Profit Legal Persons of the Mayor’s Office, for review.
In other cases, they can be submitted to the Governor of the department where it will be created.
Both documents must be signed before a notary public and personally.
In order to register with the Chamber of Commerce, the Dian or the Government, you must have:
- Fill out previously and register the Pre RUT.
- Register the RUES Single Business and Social Registry form.
- Acceptance of positions of dignitaries, lawyers in the statutes and together with a photocopy of identity cards and professional cards of each one.
Once you present all this, you can request the certificate of existence and legal representation of the foundation.
Nevertheless, Before registering, we recommend several things:
- Confirm that the activity that your foundation plans to carry out can be carried out at the address of the registered address and in the designated geographic area.
- Verify that the name and the most important data of your foundation have not been registered previously.
- If the foundation is going to use a trademark or logo, it must be established that it has not been registered.
- Find out the International Standard Industrial Classification (ISIC). This determines the economic activity to be carried out by any organization registered with the chamber of commerce, in this case, your foundation.
After verifying, you can proceed to register. This serves to give your Foundation a legal personality with rights and duties.
To register the foundation, the procedure must be done by public deed in the chamber of commerce.
Chamber of Commerce Registry
- You must attach the Single Business and Social Registration Form (RUES). This form can be found at the office of the chamber of commerce in your city.
- You must also have the additional registration form with other entities (CAE).
- You must have the certificate of existence and legal representation of the foundation.
- You must obtain the Tax Identification Number NIT.
- It is necessary to register the books of your foundation that are required by the authorities.
- Present the constitution document of your foundation with the statutes included and attach the letters of acceptance of the position of the people who will be in charge of the foundation.
- Process the labor and industrial safety certificates.
However, Foundations are not required to register with the Chambers of Commerce. For this reason, you must approach the respective Chamber of the domicile of its foundation, to know whether or not it will be obliged to this registration.
Too, you must register with DIAN.
Once you have the certificate of existence and legal representation, it is necessary to go to the DIAN to request the RUT.
The RUT or Single Tax Registry has the purpose of registering your entity before the tax system as a non-profit legal entity.
When a foundation is non-profit it is because:
- The main corporate purpose is destined to sports, health, education or other similar ones.
- These activities are of general interest.
- The surpluses will be totally reinvested in the social purpose of the foundation.
To formalize the RUT, the legal representative of the foundation must:
- Create a bank account and present proof of ownership with an issue date of no more than one month.
- Submit the form that facilitates legal persons to open bank accounts and register with the RUT.
- Present the certificate of existence of the foundation.
Also, the foundation must be registered or registered with the Governor of the foundation’s domicile department.
In the case of those created in Bogotá, this registration must be made before the District Directorate for Inspection, Surveillance and Control of Non-Profit Legal Persons of the Mayor’s Office.
What is this record for?
To comply with the inspection, surveillance and control of the foundations in order for them to carry out lawful purposes.
You must present:
- Copy of the act of Constitution and Statutes.
- Certificate of existence and legal representation.
- Draft budget for the validity of the first accounting year.
- Initial balance.
- Certificate of Registration of Assembly Minutes Books.
- Also the certificate issued by the fiscal auditor of the foundation.
- Referral letter addressed to the entity where the attached documents are established.
What is the Donation Certificate?
It serves to corroborate that it is honestly a donation and that it can be deducted from income tax.
For this reason, it is so important to request it.
Donation certificates must meet the following requirements:
- Value to deduct from the rent.
- Donation income must be managed through deposits or investments in financial entities.
- Cash donations must be made by check, credit card or financial intermediary.
- When the donation is made in assets such as movable and immovable property, the value of the donation will be the cost or price of the good.
- The document stating the above must be signed by both the tax auditor and the accountant of the foundation.
- The form, amount and destination of the donation must be stated.
- Who can constitute a foundation?
A foundation can be created by both natural and legal persons, public or private.
- How is a foundation governed?
They are governed by a body called the Board of Trustees and made up of a minimum of three employers.
They can be both natural and legal persons and, in the latter case, public or private.
The trustees are appointed by the founders, and then they can be changed according to what the statutes dictate. In no case may they receive any direct or indirect remuneration for the exercise of their functions.
- What is the destination of the income obtained in a Foundation?
Foundations are obliged by law to allocate their assets and their income to their foundational objectives.
That is to say, according to the legislation of the income and net income that the foundations obtain, a minimum percentage must be given to activities, and the rest to increase the endowment or reserves.
- What is public control over a foundation like?
When the Foundation is already registered in its corresponding Registry of foundations, either state or regional, it is subject to the control of a special administrative body called the Protectorate.
Annually, the foundation must present its action plan to this Protectorate and must be accountable to it in matters such as modifications to the statutes or requests for authorizations and permits.
- Should i renew my foundation registration?
Yes. It is mandatory to renew your foundation’s registration every year.
- The renewal must be done in the first three months with the corresponding fees and with the new Single Business and Social Registry (RUES) form.
- You must also have the ISIC code.
- The renewal and payment can be done through the Internet.
- What is the difference between Foundations and Associations?
Foundations and associations pursue general interest purposes and are non-profit entities.
The main difference between the two is their nature.
That is, while the association is characterized by being a group of people with common interests; the foundation consists of a patrimony contributed by its founder and that is destined to a purpose of general interest.
Now, in terms of order.
Associations are governed by the will of their associates. That is, so they have greater autonomy of decision.
Foundations operate at all times according to the initial will of their founders. Well, it acquires a permanent character.
Likewise, associations are financed by the periodic fees of their members and by obtaining other income.
While the foundations receive an initial endowment from the founders, in addition to other income that they can obtain later.
Finally, in the case of dissolution of a foundation, its assets and rights are allocated to other foundations or private or public non-profit entities that also pursue general interest purposes. However, in the event that an association disappears, its assets will have the destination provided for in its statutes.
Why create a foundation?
Because we are in times of economic, social and ideological crisis. Every day there are more people and companies that want to start projects of general interest.
Public aid is something forgotten. Governments do not act and it is civil society that gets to work.
In other words, creating a foundation is deciding to affect assets, rights or resources to fulfill general interest purposes. Without distributing the benefits among the founders. Benefits that have to be given, since a foundation without benefits is either from a political party or is public.
Also, many people find the creation of a Foundation attractive as another way to pay taxes.
Foundations, at most, pay 10% in corporation tax.
Saving taxes is tempting and channeling personal wealth as well.
However, whoever considers this option will do a bad business. In order to enjoy the tax advantages, it is necessary to develop an activity that is considered to be of general interest, as has been said, of social, cultural, and health care. But, above all, because recovering the patrimony contributed to a foundation is practically impossible.
To fulfill the social purpose, the foundations receive income as donations and can develop social activities that produce income. For none of this they pay taxes.
In the event that the time for the dissolution of the entity arrives, the entire equity must be destined to another non-profit entity, the State or other public entities.
Likewise, the patrons of a foundation, who are similar to the partners of other types of entities, cannot charge for their work in the entity.
However, in their task as managers they can provide services to the foundation, for which they will charge. Likewise, the foundation is free to hire and pay its staff.
In the same way as the tax benefits is the profitability, which is measured in the improvement of the public image that involves making the solidarity concerns known through the constitution of one of these entities.
- Review all forms very well before submitting them. A slight mistake can result in deregistration.
- When registering the foundation, you must pay for the registration fees.
- If your foundation needs an environmental license to operate, you must process it at the Administrative Department of the Environment or at the Regional Autonomous Corporation of Cundinamarca.
- There is the possibility of registering foreign foundations in Colombia.
- If you are going to renew the registration of your foundation, you must have the virtual services code of the chamber of commerce where you have registered.
- Foundations cannot open branches and agencies.
So well, if you are a successful person who wants to help society and you are thinking of starting your own Foundation or NGO, you must make sure that you fully understand the many demands that its operation entails.
Helping people is very rewarding, but it requires much more than financial support.
- Create the necessary commitment.
There is a phrase that explains this point very well: “You have to have passion for what you do, because you are going to dedicate a lot of your personal time to the cause.”
- Get good advice and create the bylaws.
An experienced attorney can help you decide and set up the Foundation by submitting the documents on your own.
The Foundation must be governed by statutes that include provisions for the governance of the organization and the selection process for Trustees and decision-making, the necessary meetings and conflict of interest policies.
- Develop award criteria.
Foundations must create a clear set of criteria for the selection of recipients of the funds. You must identify the types of programs that are supported and a timeline for their implementation, program selection, and awarding of grants.
You can also request tracking reports from recipients of funds to document how the money was used and the impact it had.
- Make up a strong Board.
A Foundation may sometimes have family members as allies on its board, but this may not be the best approach.
- Create a sustainable plan.
Raise the funds necessary to sustain the foundation so that it does not go bankrupt soon after.
- Avoid conflict.
Every nonprofit foundation must avoid conflicts of interest, such as using the foundation to advance business purposes. Having a foundation to sell products or services could mean losing tax-exempt status.
Likewise, these organizations are not generally allowed to participate in political activities.
If you are then interested in having an organization that helps people, follow all the Requirements to Create a Foundation. Get good advice and much success.
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