A foundation (or stichting in Dutch) is a legal entity in its own right with its own assets and liabilities. The legal concept of the stichting developed ages ago from capital being set aside for a special nonprofit or charitable purpose and was originally used by religious and welfare groups. The stichting is still frequently used for religious and nonprofit organizations. Distributions to incorporators or to those, who constitute its bodies, are not allowed, and its distributions are furthermore restricted by law to distributions with an ideal or social purpose.

The foregoing does not mean that the use of a common foundation is restricted to charitable purposes. It can be and is extensively used in structures in which the foundation is the legal owner of assets of which others hold the economic ownership. Any distributions are then neither out of its own funds nor out of its own income and are thus permissible. Also, the restriction does not apply to liquidation distributions: it is permissible to state in the articles of incorporation that upon liquidation the assets shall be distributed to e.g. the incorporator. A stichting can for example act as custodian or trustee of assets, entrusted and transferred to it for the purpose of investing, administering and managing such assets on behalf of third parties. A stichting is therefore an ideal vehicle to realize an economic transfer, without transferring control of the assets.

The principal difference between a stichting and a corporation is that a stichting has neither members nor shareholders, nor a capital divided into shares. The board of a stichting, which manages its affairs, is therefore not subject to the overall control of shareholders or members. The initial managing board is appointed at the moment of incorporation. Thereafter vacancies are filled at the sole discretion of the sitting board or by another person or body specially nominated for that purpose.

The foundation may be formed for an unlimited duration, for a certain period of time, or until a specified event occurs. The foundation can be dissolved by resolution of the board, unless the articles of incorporation provide otherwise. It is for example possible that the incorporator has the authority to dissolve the foundation.