Business Donor Advised Funds vs. Private Foundations
Thinking about starting your own private foundation? Private foundations are subject to a number of regulations which can be time-consuming. Establishing a business donor advised fund (DAF) through Colorado Gives Foundation can be a more efficient alternative.
Compare the benefits of a business DAF and a private foundation below. You’ll see how DAFs allow you to concentrate on the causes you care about while we manage the administrative details, making it simpler and more joyful for your business to make a significant impact in your community.
Business DAFs allow you to start making an impact right away.
Opening a private foundation can take several months and involves steps such as applying to the IRS for tax-exempt status, establishing a board, writing articles of incorporation and bylaws, among other requirements.
With a minimum contribution of $5,000 in cash, securities, or other assets to a business DAF, your investment will be entirely dedicated to making a difference in your community.
Starting a private foundation, however, may involve significant legal, administrative and accounting expenses, which is money that could otherwise be used for community impact.
Simply make donation recommendations based on organizations and causes you care about, and we will handle the rest. No more spreadsheet budgets, record-keeping, tax filings, grant administration or board management.
We offer a tiered system for our administrative fees, starting at $200 or 1% on the first $1 million, 0.75% on the second million and 0.50% on any balance over $2 million.
Private foundations typically incur annual administrative fees of 2.5 – 4%.
Business DAFs offer more favorable tax deductions for donors with up to 60% of adjusted gross income (AGI), compared to just 30% with a private foundation.
Since business DAF funds aren’t taxed, you can make a bigger impact with your charitable investment. With a private foundation, you will typically pay a 1.39% excise tax on their investment income.
Business DAFs give you the option to allow donations to be public or private.
Private foundations require you to disclose information about grants, staff salaries, investment fees and more.
With a business DAF, you have the flexibility to make donations at any amount over $250.
Private foundations are required to distribute at least 5% of their net assets annually for charitable purposes.
There are many benefits of establishing a business DAF. However, it’s important to note that, unlike a private foundation, you cannot make direct donations to individuals.
Gerry Culver
Development + Community
Engagement Manager
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