The Private Interest Foundation is a legal entity that was developed in Panama based on the Private Interest Foundation models from three different jurisdictions including the Principality of Liechtenstein, Switzerland, and Luxembourg. The assets of the Panamanian Private Interest Foundation take on a separate legal identity from the personal assets of the Founder, Protector, Council or Beneficiaries.

Panama Private Interest Foundations may be established for the benefit of a person or persons, a family, or a specific social purpose.

In general, people who wish to control and maintain ownership of foreign corporations can do so through the proper use of Private Interest Foundations. In the event they do not wish to own their corporations themselves directly, due to the Controlled Foreign Corporation (CFC) roles in their home countries, the Foundation provides an excellent alternative.

Instead of holding the corporations' shares in their personal name or in bearer form, they establish a Private Interest Foundation that holds or owns the shares of their foreign corporation(s), thus avoiding the CFC reporting rules. Hence, the advantage of using the Foundation as a shareholder for their corporation is to remove ownership from one's personal name (or through a Bearer Share arrangement), and transfer ownership to the name of a foreign entity which does not have owners, rather has private appointed beneficiaries, which are anonymous. In this way, there is no question as to who owns the company, since the company's shares are issued in the name of the Foundation.

Another advantage of utilizing the Foundation as a shareholder applies in the following scenario: In many cases, when opening corporate bank accounts or investment accounts, the financial institutions require that you reveal the beneficial owners of the corporation. Through the Foundation ownership strategy, one can state that the Foundation is the owner of the corporation. Again, the objective is to remove ownership from their personal name, to the name of a foreign entity whose ownership is anonymous.

The Foundation can be useful in transferring funds offshore or receiving funds from offshore. Some people donate their funds to their Panama Foundations and later use the Foundation to give educational or special grants to their children, grandchildren, or anyone else they choose. The advantage in this case, is to avoid fiscal regulations surrounding donations, where some governments impose "gift taxes" and exhaustive reporting requirements.

In general, Private Interest Foundations may not engage in habitual profit-making commercial activities as a corporation can. Nevertheless, they may carry out commercial activities from time to time, as long as the profits of those activities are used for the objectives of the foundation.

The Foundation has a

• Founder
• Council
• Protector
• Beneficiaries

Founder
The Founder is the person or entity that establishes the Foundation in the Public Registry of Panama. Our law firm is generally the Founder of each Foundation that we establish. Since it is our law firm that goes to the public registry to incorporate the Foundation, the Founder has no influence over the control of the Foundation, and is only recognized as the individual who presented the Foundation articles in the public registry when the entity was originally registered.

Council
The Foundation's Council serves the same purpose as the board of directors of a corporation. The council members are each registered in the public registry with their names, addresses, and identifications as council members to the Foundation. Our firm generally appoints a "Nominee Foundation Council" to fill the council positions, so to provide additional privacy and confidentiality for our clients.

Protector
The protector is the person or entity that ultimately controls the Foundation and all assets held within. The Foundation Council appoints the protector. When the Foundation is created and the Protector is empowered, the Protector can then remove the council members at any time without consent of any one else. The Protector can be appointed privately, through a Private Protectorate Document, signed by the Foundation Council. Hence, the Protector can maintain his position free of public knowledge.

We generally appoint our client as Protector of the Foundation, through a notarized Private Protectorate Document so that our client maintains complete control over the Foundation, in a private and anonymous manner. Once the Protector is appointed, the Protector can always be changed per the Protector's wishes. However, a Protector is not required or if you prefer, you can choose not to use a Protector, but to use a nominee Protector.

Beneficiaries
Unlike a corporation that issue share certificates to certify who the owners are, the Foundation does not have owners, but rather it has Beneficiaries. The Foundation's beneficiaries are appointed by the Protector through either a simple privately written Letter of Wishes, or through a more formal set of Foundation bylaws (Foundations bylaws should be written with the assistance of a Panamanian Attorney). Either way, the privacy and confidentiality of beneficiaries can be protected through their appointment in the Letter of Wishes, or bylaws of the Foundation, since the contents of the Letter of Wishes or bylaws may remain private and need only be known to interested parties. Also, a Foundation may be set up so that the Protector is the sole beneficiary until his or her death, at which time the foundation continues for the benefit of other beneficiaries.

Letter of Wishes
The Letter of Wishes is a simple letter, written by the Protector, which specifies exactly how the Foundations assets should be handled or distributed upon a triggering event such as the death or incapacity of the Protector. The Letter of Wishes should also state whether the Foundation should continue existing, and have a new Protector appointed, or if the Foundation should be dissolved upon the death of the Protector. There is no specific format for the Letter of Wishes and it can be re-written or changed at any time after the Foundation is incorporated, per the Protectors wishes. The Letter of Wishes can be held privately, or can be registered publicly. Generally, most people prefer to maintain the Letter of Wishes privately, so that the Beneficiaries and Protector remain anonymous and private.

Foundation Bylaws
The Foundation does not need to have bylaws, since a Letter of Wishes is legally sufficient for expressing the Protectors' requested testamentary instructions. However, if one wishes to have a more formal Foundation testamentary document, written and signed by a Panamanian Attorney, and notarized by a Panamanian Notary, then one can request the assistance of a Panamanian Attorney to draft the Foundations Bylaws. The Foundations bylaws essentially handle the same function as a Letter of Wishes since the bylaws should specify exactly how the Foundation's assets should be handled or distributed upon a triggering event such as the death or incapacity of the Protector. The bylaws should also state whether the Foundation should continue existing, and have a new Protector appointed, or if the Foundation should be dissolved upon the specified triggering event(s). There is a specific format that the bylaws must be written, yet the contents of the bylaws can be held privately, or can be registered publicly. Generally, most people prefer to maintain the bylaws privately, so that the Beneficiaries and Protector remain anonymous and private.