A New Business Philanthropy Paradigm For Funding Charitable Organizations and Ministries

There is a new way for benevolent fund-raising circulating around the country. Some call it "doing well while doing good." This creative business philanthropic paradigm can have a two-edged benefit to it, if done with the right kind of company. Edge one: providing a manufactured product, such as a meal pack for feeding the starving. Edge two: utilizing an income generating business system that works with the purchasing and sending of such product.

So, you need a company that pays commissions, probably in the network marketing realm. The company has to have certain aspects to their business system, organization, and compensation plan that will benefit philanthropic efforts. First, the company must pay commissions on a product that is dedicated to charitable work, like providing food or something else that benefits the poor, starving, and needy. That way, buying and sending the product to the needy is a charitable act in itself. Second, this company must have a residual income plan for ongoing ordering and commissions. This aspect benefits the charity or charitable giver that becomes involved with the product and company. Thirdly, they must have a multilevel compensation structure. In order for the charitable giver or charity to grow a perpetual income for their cause, they must be able to build a multilevel structure that generates a consistent and growing monthly income.

The dual benefit is that the charitable product itself can be purchased and provided for those in need, and the income from building a charitable purchasing network will benefit the enrolled charity or giver. Again, the two edged benefits need to be: (1) a product that meets needs; (2) an income generating system.

Family Philanthropy - 4 Ways to Structure Cross Generation Giving Activities

Members of wealthy families can utilize philanthropy to build and carry on the family legacy as well as to teach values and provide practical life experience to younger generations - but how do you organize to allow multiple family members from multiple generations to participate in the same effort?

Here are 4 examples to aid you in determining what will work in your family.

Use your Family Meeting

The simplest way to involve family members is to just discuss philanthropy at the family meeting. In this example, the family does not have specific funds allocated to giving. Each immediate family unit does their own giving, but the members plan and discuss the causes that support the family mission and values. The family meeting agenda includes an item to review the family mission and values and hear from family members on which charitable organizations best support them. Each family is free to utilize the results of the discussion as they see fit.

Set up a Family Philanthropic Council

A more formal, but still a simple and private way to engage across generations can be to set up a family council (or committee) to focus on philanthropy. In this example, the family establishes a pool of money each year to donate as a group (using the money each individual family would have donated). The family at large then selects family members to utilize the pooled family funds, and identify, investigate and contribute to charities that fit the mission as well as provide informal reporting back to family meeting through the year and formal reporting at the family meeting. This council may well provide reporting to the family on how the pooled funds were invested and why.

Build a Grandparent/Grandchild Philanthropic Board

In this example, the grandparents mentor the grandchildren (without the parent's presence) in the various things that are needed to give wisely. This fosters inter-generational communication and relationship building and gives the grandparents a continuing role in family governance without treading on the children's domain in the family. All grandchildren over the age of 6 participate by submitting a request to grant money to their preferred cause. This helps the child learn to organize material, make a presentation (at their own level) and become an advocate of something they are highly interested in.

Children 12 and older form an investment and administrative committee for the board - letting them learn and practice investment methods along with learning business skills that translate into the for profit world.

Establish a Formal Family Philanthropic Foundation

Families with 5 or more million dollars can consider establishing a public entity (Trust or Corporation) as an ongoing Foundation to carry forward their legacy of giving for many generations.

A foundation is a family-controlled trust or nonprofit corporation that is exempt from federal and state income taxes. It's purpose is to make grants to publicly supported organizations that address the needs of the community - ones the family cares about. There are strict government regulated reporting requirements and rigid restrictions on using the money for private individuals (including donor and family).

Processes, objectives and reporting obligations for a foundation should be formal and disciplined - including doing an 'investor profile' to determine types of investments, levels of risks, etc.

Here are some of the benefits of establishing a Family Foundation:

    the family's influence is felt and the family charity objectives are achieved for the long term - no matter what happens to the rest of the family fortune
    formal investment managers identify and use an investment policy appropriate to gift giving (level of risk and etc)
    proper governance and a dedicated management team keep the foundation healthy

Drawbacks of establishing a Family Foundation include:

    the cost of setting up the legal entity to hold the foundation as well as the costs of running it (salaries of the personnel involved)
    the risk of loss of family involvement due to the more formal nature of the Foundation

In summary, four methods of involving multiple generations in family philanthropy are to a) use your family meeting b) set up a family council c) let the grandparents mentor grandchildren while the grandchildren handle the giving and d) set up a formal family foundation.