Foundation Establishment

Written by Almer Aditya Rahimsyah on 05/08/2024
The author’s views are entirely their own and may not always reflect the views of Putranto Alliance.

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Introduction

A foundation is a non-profit organization dedicated to social, educational, or humanitarian causes. By creating a foundation, individuals and organizations can channel their resources and efforts toward meaningful initiatives that advance the welfare of humanity. A foundation provides a structured and sustainable platform to achieve long-term philanthropic goals. This article delves into the intricacies of foundation establishment, highlighting its importance, benefits, and the process involved, ensuring that your vision for a better world can be realized effectively.

Definition

A foundation is a non-profit organization established for social or educational purposes. Foundation assets can be acquired through money, goods, and other items. These assets are prohibited from being transferred or distributed directly or indirectly, either in the form of salaries, wages, and honorariums or other forms that can be valued in money to the trustees, management, and supervisors.

The Best Time to Establish a Foundation

The best time of foundation establishment is when there is a clear vision and mission for social or educational purposes, and when there are sufficient resources to support the foundation’s activities. Additionally, it is crucial to ensure that all legal requirements and regulations are met before proceeding with the establishment.

Benefits of Using Professional Foundation Establishment

When considering foundation establishment, several compelling advantages come to the forefront:

Asset Segregation
The foundation's assets and its founder are separated once the foundation is established.
Legal Protection and Donor Trust
Registering and legalizing a foundation as a separate legal entity provides the added benefit of legal protection, which increases donor confidence, foundations can also invest in businesses, capped at 25% of total assets.
Tax Benefits for Contributions
Grants, assistance, or donations given to foundations are exempted as Income Tax objects, provided there is no relationship with business, work, ownership, or control between the parties concerned.

Foundation Establishment Process

Before the process of foundation establishment starts, founders need to consider several aspects. Although it may seem simple, foundation establishment has its complexities. Here are some of the points to consider:

Foundation's Name
The foundation's name must be unique, not conflict with public order or decency, and start with "Foundation."
Foundation's Purpose
The foundation's purpose should be social, religious, and humanitarian engagement.
Notarial Deed
The establishment of a foundation is formed by a notarial deed.
Initial Wealth
Indonesian foundations require a minimum of Rp10.000.000,00 for initial wealth, while foreign foundations require a minimum of Rp100.000.000,00 initial wealth, supported by the founder's asset legitimacy declaration.
Founder's Identity
Passport for foreign individuals, legal entity documentation for entities.
Board Members
Foreign-founded foundations need an Indonesian board member (chairman, secretary, or treasurer). Board members require KITAS and Indonesia residency.

How We Can Help

Establishing a foundation involves numerous complexities and legal requirements. Our team of experts specializes in Indonesian regulations and can provide the following services:

Expert Guidance: We offer accurate and up-to-date information on foundation establishment requirements and procedures, ensuring that your foundation is compliant with current regulations.
Tax Planning and Optimization: Our tax consultants work to minimize estate tax liabilities and optimize asset distribution, preserving more of your wealth for your beneficiaries.
Business Succession Planning: For business owners, we provide detailed planning for business continuity, including succession planning and leadership transitions.
Dispute Resolution and Conflict Mitigation: In the event of disputes or challenges, our team is equipped to provide legal representation and conflict resolution services.

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FAQs

Why do some companies have foundations?

By establishing a foundation, companies can demonstrate their commitment to humanitarian values and social responsibility, improving the company’s image in the eyes of society as an entity that cares about social welfare and needs.

What are the relationship between board, management, and supervisors?

The management cannot concurrently serve as board or supervisory members.

Management consists of a chairperson, secretary, and treasurer, with authority to:

Handle court cases between the foundation and a member of the management.
Act when a conflict of interest arises between a management member and the foundation.
Bind the foundation as a debt guarantor or transfer assets without board approval.
Encumber the foundation’s assets for external interests.

Can foundation management have a salary, wage, or honorarium?

Foundation management can receive salary, wages, or honorarium as long as they are not the founders of the foundation and not affiliated with the founders, trustees, and supervisors and carry out the management of the foundation directly and entirely.

The details are as follows:

Board and supervisory members cannot receive wages, honoraria, or salaries.
Management members may receive salaries if:
1. The foundation’s articles of association allow it.
2. Management is not a founder and is unaffiliated with board or supervisory members.
3. The management role is executed directly and fully.
4. Salaries align with the foundation’s capabilities and are determined by the board.

What does it mean to bind the foundation as a debt guarantor and transfer assets?

The foundation serves as a guarantor for the debt of an individual, company, or another foundation.

Transferring means selling the foundation’s assets to another party depending on the context.

Can a foundation generate income, such as from tuition fees, and how is it used?

Foundations are non-profit. Any income, such as tuition fees for a school, is used for facility development, staff salaries, and operational expenses, not for profit-making.

Can a local foundation include a foreign name?

Yes, but it must be verified during the name registration process.

Can a foreign individual with an investor visa serve as a board member of a local foundation?

No. If a foreigner is involved, the foundation must:

Be a foreign foundation (Yayasan Warga Negara Asing/WNA).
Have a KITAS.
Resides in Indonesia.
Have a business/activity permit.

Can a second-home visa holder work in a foundation?

Yes. The requirements are:

Must reside in Indonesia.
Possess a valid KITAS.
Have a business/activity permit aligned with the job/position held.

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