Start Foundation

Have you planned to start a foundation but do not really know where to start and think it seems complicated? No problem, we at Europabusiness take care of the whole thing!

Are any special permits required?

For most forms of foundations, permission from the County Administrative Board is required. With a permit from the County Administrative Board, this authority will then send a request to the Swedish Tax Agency to create an organization number for the new foundation to be started. In addition, no special permit is required to start a foundation.

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One foundation is a type of legal person who, unlike associations and companies, has neither members nor owners. The foundation basically owns itself, it is often said. The foundation manages a financial asset, which one or more natural or legal persons (founders) have set aside for a special purpose, which must be over a longer period of time. The foundation is governed by a foundation ordinance, which states, among other things, how the assets are to be used (the purpose), through which activities the purpose is to be met and who or who are possible recipients (recipients) of benefits from the foundation. The actual document in which the foundation ordinance is written down is called the memorandum of association. A foundation must be managed by a board or a trustee.

A foundation is in most cases not taxable in the same way as a company. What the tax liability looks like, however, depends on the type of foundation in question.

  • Family foundations are taxable for all income. The tax rate is the same for family foundations as for limited companies.
  • Pension funds are only liable for income tax. This type of foundation is formed by an employer to secure pensions for the employees.
  • Personnel foundations normally have unlimited tax liability, but are at the same time tax-favored. This type of foundation is also formed by an employer, to promote the welfare of employees. The company allocates funds to the foundation, and in return may deduct this entire amount. If the foundation's sole purpose is to provide financial assistance to employees in the event of, for example, unemployment or illness, it only needs to tax real estate income.
  • Payment from profit-sharing foundations must be taxed by the employees, and is not sickness benefit qualifying. A profit-sharing foundation manages part of the company's profits and distributes this to the employees after a certain period of time. Social security contributions are added to the provisions of the foundation, and the payment to the employee is taxed, at the time of the payment, as income from employment. The money must be stored for at least three years, and at least one third of the employees must be covered by the system.

If the foundation promotes a non-profit cause, such as sports, culture, care for children and young people or scientific research, the foundation is not liable to tax.

To start a foundation, there must be a property: this can be money, real estate or shares. There must also be a deed of gift, a document such as a will or some other document stating how the property is to be used, how the board is to be appointed and who or who is allowed to take part in the property. A foundation must also always have the word foundation in its name. Most foundations must be registered with the County Administrative Board, such as return foundations, fundraising foundations and other business foundations. This is because this authority ensures that the foundation is formed in the right way. Thereafter, it is also the County Administrative Board that ensures that it is run in the right way, and finally liquidates a foundation when requested.

The Swedish Tax Agency is the authority that will then create an organization number for the foundation. Foundations that are not to register with the County Administrative Board are foundations aimed at certain families or certain persons, profit and profit-sharing foundations and pension and personnel foundations. These register directly with the Swedish Tax Agency.

The most common form of foundation is a return foundation. It is a foundation that fulfills its purpose by distributing that return from the assets. This can be done through scholarships or grants for research and the like. One of the more unusual forms of foundations is foundation-owned companies. One such example is Mercuri Urval Sweden. The reason for creating such a foundation is that the company founder wants to preserve the company as it is even after his death: that is, that it can not be bought up, division of ownership and control or simply for tax reasons when it comes to a generational change in a family business. In this form, it is most common for the foundation to have a board that handles all matters. However, the board is always bound to decide on the basis of what is stated in the memorandum of association (gift certificate or will). Another way of running a foundation is through a so-called affiliated administration. It can then be a bank, a municipality, a non-profit association and not a board then.

A foundation's capital must be managed for a long time. This applies not least if the foundation is to distribute grants or scholarships. These funds in most cases come from dividends on shares and funds, as well as from interest income. A foundation that distributes money for public benefit purposes should above all have shares in its portfolio.

A foundation must almost always have competent asset management in order to survive. There are many players in the financial sector who can assist with this. They can also give advice when you start a foundation, as well as help the foundation with bookkeeping and preparation of financial statements, annual report, control information and tax return.