It is quite difficult to fathom a world where a single helping hand does not exist. Although some people would say that it is a bitter reality, we must prove that it is, in fact, not. Sometimes, random acts of kindness and a helping hand are all we need to function as human beings in this humane society.
Structures like Public Charities and Private Foundations have made it considerably easy for struggling people to overcome their weaknesses by grabbing a lending hand.
However, when it comes to this, it is extremely necessary for us as literates to be able to understand the difference between the two diverse structures of a public charity and a private foundation.
Comparison Between Public Charity and Private Foundation
| Particulars | Public Charity | Private Foundation |
|---|---|---|
| Acquisition of Funds | A public charity acquires its funds through both individuals and organizations. Moreover, a public charity can acquire funds by way of a private foundation, but not the other way around. | A private foundation acquires its funds only though a single source only. Moreover, while a private foundation can fund a public charity, a public charity cannot fund a private foundation. |
| Disbursement of Funds | A public charity is authorized to make use of their funds and resources only for the purpose of carrying out their direct operational activities. | A private foundation is authorized to make use of their funds and resources only for the purpose of making grants to individuals or other kinds of charities. |
| Scope | A public charity cannot be referred to as private foundations, since the scope of public charities are considered to be narrower than that of public foundations. | A private foundation can also be referred to as charitable foundations, since all charitable organizations are by default considered to be private foundations since their inception, until changed. |
| Establishment | A public charity is required to prove to the Internal Revenue Service (IRS) that it is not a private foundation in order to be referred to as an established public charity. | A private foundation is required to present a larger up-front commitment of steady income, both for the purposes of being able to start the foundation’s operations as well as to pay its legal fees in order to be referred to as a successfully established private foundation. However, it does not have to prove its nature to the Internal Revenue Service (IRS). |
| Control | A public charity is required to be reviewed by the Internal Revenue System (IRS) to be able to ensure that the members of the public charity are independent and represent the interests of the public. Thus, the element of control lies with the Internal Revenue System (IRS). | A private foundation is considered to be a single family which is solely consistent with the members of the board of directors of the private foundation. Thus, the element of control does not lie with the Internal Revenue System (IRS), but the private foundation’s board of directors itself. |
Contrast Between Public Charity and Private Foundation
What exactly is a public charity in relation to?
The structure in relation to a public charity is considered to be a type of charitable institution that looks towards furthering the primary objectives of philanthropy and the social well-being of the society at large.
When it comes to public charities, the members of the foundation are considered to be independent and supposedly represent the broader interests of the public at large.
What exactly is a private foundation in relation to?
The structure in relation to a private foundation is considered to be a type of charitable institution that is, in the most general sense of understanding, established for charitable purposes as well as to provide donors with a tax deduction for their contributions to the foundation.
Major Differences Between Public Charity and Private Foundation
Acquisition of Funds
- Public Charity: The structure in relation to a public charity, in the most general sense, manages to acquire funds for the purpose of carrying out its operations by way of a variety of sources, including individuals and organizations.
It is also of an imperative nature to understand that while the structure in relation to a public charity can acquire funds by way of a private foundation, but not the other way around.
- Private Foundation: The structure in relation to a private foundation typically acquires funds by way of a single source only, unlike that of the situation that is particularly posed in the context of the structure in relation to the idea of a public charity.
It is also of an imperative nature to understand that while the structure in relation to a private foundation can fund a public charity, the structure in relation to the idea of a public charity cannot fund a private foundation.
Disbursement of Funds
- Public Charity: The structure in relation to a public charity is considered to be authorized to make use of their funds and resources only for the purpose of carrying out their direct operational activities, unlike that of the situation that is particularly posed in the context of the structure in relation to the idea of a private foundation.
- Private Foundation: The structure in relation to a private foundation is considered to be authorized to make use of their funds and resources only for the purpose of making grants to individuals or other kinds of charities, unlike that of the situation that is particularly posed in the context of the structure in relation to the idea of a public charity.
Scope
- Public Charity: The structure in relation to a public charity in its core sense of understanding cannot be referred to as a private foundation, unlike that of the situation that is particularly posed in the context of the structure in relation to the idea of a private foundation.
This is typically due to the fact that the scope of public charities is considered to be narrower than that of public foundations.
- Private Foundation: The structure in relation to a private foundation in its core sense of understanding can also be referred to as a charitable foundation, unlike that of the situation that is particularly posed in the context of the structure in relation to the idea of a public charity.
This is because all such structures of charitable organizations are by default considered to be private foundations from their inception until changed.
Establishment
- Public Charity: The structure in relation to a public charity is required to prove to the Internal Revenue Service (IRS) that it is not essentially a private foundation in order to be referred to as an established public charity, unlike the situation that is particularly posed in the context of the structure in relation to the idea of a private foundation.
- Private Foundation: The structure in relation to a private foundation is required to present a larger up-front commitment of steady income, both for the purposes of being able to start the foundation’s operations as well as to pay its legal fees in order to be referred to as a successfully established private foundation.
However, it is imperative to note that it does not have to prove its nature to the Internal Revenue Service (IRS), unlike that of the situation that is particularly posed in the context of the structure in relation to the idea of a public charity.
Control
- Public Charity: The structure in relation to a public charity must be reviewed by the Internal Revenue System (IRS) to ensure that the members of the public charity are independent and supposedly represent the broader interest of the public at large.
It is thus considered imperative to note that the element of control lies with the Internal Revenue System (IRS), unlike that of the situation that is particularly posed in the context of the structure about the idea of a private foundation.
- Private Foundation: The structure in relation to a private foundation is typically considered to be of a single family, which is solely consistent with the members of the board of directors of the private foundation.
It is, however, of an imperative nature to note that the element of control does not lie with the Internal Revenue System (IRS) but with the private foundation’s board of directors itself, unlike that of the situation that is particularly posed in the context of the structure in relation to the idea of a public charity.
Frequently Asked Questions (FAQs)
What is the key difference that exists between the two diverse structures in relation to the ideas of public charities and private foundations, respectively?
The key difference that exists between the two diverse structures in relation to the ideas of public charities and private foundations is with regard to how the two structures acquire their funds and resources.
It must be understood that while public charities derive their funds by way of both individuals and organizations, including a private foundation, the structure in relation to a private foundation, on the other hand, only derives its funds from a single source.
How should the structure in relation to a private foundation be composed?
The structure in relation to a private foundation is supposed to have a small group of board of directors, who, amongst themselves, are considered to be members of the same family, wherein one person (usually the donor) is supposed to be the head of the foundation.
How should the structure in relation to a public charity be composed?
The structure in relation to a public charity is supposed to have a large composition of independent members who are supposed to be unrelated to each other in a majority sense of understanding the context.
How do the diverse structures in relation to a public charity and a private foundation disburse their funds?
While the structure in relation to a public charity is only authorized to make use of its funds and resources only for the purpose of carrying out its direct operational activities, the structure in relation to a private foundation has the authority to be able to disburse its funds only for the purpose of making grants to individuals or other kinds of charities.
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