What purpose should the foundation have?
The purpose of the foundation is the most important basis for a charitable foundation. It is binding for the foundation board and must be concretised by it in a foundation strategy. Formulating the foundation's purpose is an art. The purpose of the foundation and, if necessary, a supplementary mission statement of the founders should provide information about their motives, considerations and objectives. They form the basis of orientation for the foundation board and enable it to act in the interests of the founders if they are no longer there. At the same time, the foundation's purpose must not be formulated so narrowly that all room for manoeuvre disappears and even minor social changes or innovations render the foundation's purpose obsolete. Foundation law takes this challenge into account by allowing for a reservation of change of purpose, which makes it possible to subsequently change the purpose of the foundation in the interests of the founder.
Should it be a consumable foundation or a permanent foundation?
The founders can decide whether the foundation's assets may be utilised or whether they are to be preserved. In the case of a consumable foundation, the assets can be consumed and the founders can limit the duration of the foundation. A foundation that is intended to preserve the assets pursues the foundation's purpose by distributing the income from the foundation's assets. In such a case, it is important to get an idea of the expected income and the costs. Is the income sufficient to finance the purpose of the foundation and its costs? This also involves determining an appropriate investment strategy, which is different for a consumer foundation than for a foundation that is intended to preserve the assets. Another important point is the definition of income. For example, do only interest and dividends constitute income or can other income components such as capital gains also be distributed? The period of zero interest rates in recent years has created a dilemma for many foundations with a mandate to preserve assets. There was actually no income that could have been distributed.
Is an independent foundation or an endowment the right choice?
An independent foundation makes sense if the assets contributed are sufficiently large or more complex, if the independent external presence is of great importance and if it is not a short-term consumable foundation. In such a case, the foundation costs of CHF 10,000 to CHF 15,000 are justified and the income is high enough to more than cover the foundation's expenses and effectively pursue the foundation's purpose. Independent foundations begin to pay off with assets of well over one million Swiss francs.
An alternative to an independent foundation is the establishment of a sub-foundation under the umbrella of a superordinate foundation (umbrella foundation). An umbrella foundation is a foundation that serves as a legal vehicle for a large number of sub-foundations or endowment funds (so-called sub-foundations). These sub-foundations can be organised with their own purpose, their own decision-making body and their own sub-foundation assets. They can also have their own external appearance, but are always legally part of the umbrella foundation. In some cases, sub-foundations are also set up precisely because no public presence in the commercial register is desired. The persons responsible for the endowment do not appear in the commercial register. Sub-foundations are more cost-effective, efficient and flexible. Particularly in the case of smaller assets or consumer foundations, the fact that the establishment of an endowment is many times cheaper and is not publicly notarised can be a decisive factor. The flexibility of an endowment is demonstrated, for example, by the fact that it can be closed again or transferred to another foundation without a time-consuming liquidation process. One example of a small umbrella foundation is the FONDATION GÉNÉROSITÉ.
When can I set up a foundation?
A foundation or endowment can be set up during your lifetime. This has the advantage that the founders can help shape the foundation and the foundation board and that the founder's will is not only passed on in writing, but also in deed and concrete implementation to the successors. Those who do not wish to concern themselves with the establishment and management of a foundation during their lifetime can set up a foundation in their will or by means of an inheritance contract. In this case, the foundation only comes into existence upon the death of the founders.
How do I set up the foundation board?
The founders appoint the first foundation board and can determine in the foundation statutes how the foundation board should subsequently be composed. One member of the foundation board must be resident in Switzerland. As long as the founders are alive, they can reserve the right to determine the composition of the foundation board. Otherwise, the law stipulates that the foundation board constitutes itself. It is also possible to appoint the foundation board members according to competences or functions.
Supervision and accountability
Charitable foundations are subject to state supervision. Foundations that are only active in a specific canton are subject to cantonal foundation supervision. Foundations that are active nationwide or internationally are subject to federal foundation supervision. The tax authorities are also responsible for determining whether the foundation fulfils the requirements for tax exemption due to its charitable status.
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