Starting a Business Registration of Delaware private foundation in Texas?

[Blissful Visions]

Jurisdiction

Texas

I want to form a private foundation in the state of Delaware, and donate funds to nonprofits and individuals in other U.S. states, including Texas where I currently live. It only takes one person to form a private foundation or nonprofit in Delaware, whereas in most other states it takes three unrelated persons, including Texas. Is it necessary for me to register as a foreign entity (aka "out-of-state-entity") in Texas and in the states where I want to donate? Checking the registration requirements for foreign entities at the Texas Secretary of State website, I see NO rule under the heading "Registration Requirements" that requires a nonprofit to file for registration. Your answer is much appreciated.[h3][/h3]

Foreign or Out-of-State Entities

 

[army judge]

I want to form a private foundation in the state of Delaware, and donate funds to nonprofits and individuals in other U.S. states, including Texas where I currently live

You'll not be able to do that which you mentioned without hiring an attorney to do it correctly.

You certainly won't get what you desire by using information supplied by strangers.

Don't risk big trouble with federal or state tax authorities.

Anytime money is involved, big or little money, you need an attorney to do the heavy lifting.

If you can't afford to hire an attorney, you can't afford to do that which you mentioned.

You can start your search for a great attorney here:

https://www.texasbar.com/Content/Na...Lawyer/LRISOnlineAttorneyReferral/default.htm

 

[adjusterjack]

I see NO rule under the heading "Registration Requirements" that requires a nonprofit to file for registration.

That's wrong. Just because it's not specifically mentioned doesn't mean it's exempt.

Any number of the entities listed could be set up as non-profits.

Why don't you just call the Secty of States office, explain what you are doing and ask if you have to register as a foreign entity.

 

[Tax Counsel]

Is it necessary for me to register as a foreign entity (aka "out-of-state-entity") in Texas and in the states where I want to donate?

Typically private foundations are structred as a corporations. Are you planning on organizing it as some other kind of entity? If you are operating the foundation in Texas then you will want to register as a foreign entity regardless if the state law specifically requires it. If you don't do that you don't get any of the limited liability protection that entities like corporations provide to their owners. As a general rule in the U.S. a business entity is either required or should be registered in the state in which it is managed and controlled (i.e. where their headquarters are located) and in any other state in which the entity conducts any significant business activity. Simply cutting a check to some out of state entity won't require registration in that state. You'd need to have more business activity in that state other than providing money to charities in that state. Since you will be managing the foundation in Texas you will want to register as a foreign entity to avoid losing limited liability for any claims against you and the foundation in Texas.

You will also have to organize your entity as a private foundation with the IRS, too. Be aware that there can be income tax required of a private foundation. A private foundation is not a charity as defined in tax law even though it may be pursuing some public good.

If you have the money to be making donations through a private foundation then you can afford to consult an attorney who practices in the area of exempt organizations for advice and help getting it started and understanding what the obligations of a private foundation are. That's important because it can really cost you if screw it up. Don't be pennywise and dollar foolish on this. Among the things you should discuss with the lawyer is the state in which it should be organized. Delaware is not always the best choice.