Most people understand charities as functioning to help people by allocating money and resources to people’s needs. That’s true, but charitable organizations work in several different ways. When it comes to private vs. public charities, what’s the difference between the two? Our guide explains the qualities of each and how that affects their function and public engagement.
Private foundations are charitable organizations that typically form out of a significant investment by one party, be it a person or a business. These are non-profit entities that do not solicit money from donors after the initial investment, and thus don’t include a broad swath of participants. Some important differences between public and private charities include their comparative numbers and fundraising means. Public charities outnumber private foundations, and foundations are not directly responsible for charity work like public charities are. Rather, they supply funds through grants to other organizations that use those funds for practical programs. The exception to this lies in one of two categories private foundations fall into. A private operating foundation has its own means for program implementation while a nonoperating foundation does not.
Why Form a Private Foundation?
Parties form a foundation due to two reasons outside of the good charity does—the control afforded over funds and money saved through tax deductions. Money housed in a foundation is not a public entity, and the board and founder can funnel money where they would like without much government influence. Also, donors claim a portion of their donation on their taxes, though this percentage is lower than if they gave the funds to a public charity.
Public charities are much more numerous and noticeable than private foundations because they appeal to public donations and use collected funds to create their own programs. In fact, public charities must appeal to the public—charity board members need to verify that their organization receives their funding from the general public regularly. If they fail to do so, they lose their tax status. This is important because, although public charities don’t allow people to have control over their donations, they offer a high tax deduction rate. As such, they would not be able to attract as many donors if they lose their tax status.
If you would like to broaden your own giving, consider donating 2moda’s wholesale supplies to a public charity that is currently serving people. We offer wholesale bulk jewelry, kids toys, bookbags, and more to fit charities specific needs, and we’re more than willing to answer any question you have about our wholesale products.