Ingvar Kamprad, the world’s 5th richest person and founder of IKEA, isn’t the owner of a multinational corporation like one would expect, but rather the head of a non-profit that controls the furniture empire. Having IKEA classified as a non-profit isn’t just about gaining tax-exempt status, but also about maintaining control over the privately held furniture retailer, which had revenues of over $35 billion last year across 40 countries.

The non-profit foundation that is at the head of everything is the Stichting INGKA Foundation. INGKA is derived from the founder’s name and “stichting” is Dutch for “foundation”. This foundation in turn owns INGKA Holding B.V., which is the parent company of the IKEA Group. The IKEA Group is the owner of what most people would consider to actually be IKEA — its retail stores.

The Stichting INGKA Foundation, the non-profit at the top of all of this, has its own separate foundation named the Stichting IKEA Foundation (notice the middle word is IKEA, not INGKA). That’s right — a foundation that owns a holding company that owns a group of companies actually runs another foundation. The good thing is that the Stichting IKEA Foundation acts like a non-profit should and actually donates money to charity. In 2012, the IKEA Foundation donated $108.4 million to charity and partnered with groups like Save the Children and UNICEF.

The money IKEA does donate to charity pales in comparison to the $4.2 billion in total net income it made last year. Also, the tax break it gets more than makes up for the money it donates. Last year the Stichting INGKA Foundation paid 5.6% in taxes, which is much less than the corporate tax of over 20% in Sweden.

Although the Stichting INGKA Foundation controls most of IKEA, it doesn’t own the IKEA trademark and intellectual property. Instead, it created a separate company called Inter IKEA Systems B.V. and pays it a licensing fee of 3% per year. Through a complicated system of multiple companies, subsidiaries, and a holding company all located in different countries, the Kamprad family is in control of the ultimate beneficiary of these licensing fees to Inter IKEA Systems B.V. Presumably this is how Ingvar Kamprad gleans much of his wealth. Since IKEA and all of its related subsidiaries and foundations are private, it’s hard to tell for sure.

All of this fancy corporate maneuvering isn’t just about avoiding taxes. It’s also a way for Ingvar Kamprad to maintain firm control over the large, multinational conglomerate. An executive committee with only five people as members makes the decisions for the Stichting INGKA Foundation. Jonas Kamprad, Ingvar’s son, is on the committee and Ingvar Kamprad is a senior advisor to the committee. In the past he and his wife have served on the board as well.

Even after the 87 year-old Kamprad passes away, his grasp over the company will stay in perpetuity. The Stichting INGKA Foundation’s bylaws state that “shares can be sold only to another foundation with the same objects and executive committee, and the foundation can be dissolved only through insolvency.” (http://www.economist.com/node/6919139) So unless IKEA starts another foundation to further obscure its profits, the likelihood of suitable foundation emerging is practically zero.

Non-profits are tax-exempt because they provide beneficial services to society. While IKEA does donate some money to charity, the vast majority of its profits never make their way to noble causes. There’s nothing wrong with a company making money, but there is something wrong with a non-profit making huge profits for its shareholders instead of donating the money to charity.

By: David Rabinowitz

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