iiCare Nonprofit Education Series

Understanding the Ecosystem: What Every Changemaker Should Know

Welcome to iiCare's Nonprofit Education Series - a three-part breakdown designed to help you navigate the complex world of nonprofit structures and giving strategies. Whether you're a future founder, a funder, or a curious partner, we’re here to make this world easier to understand.

Public Charity vs. Private Foundation: What's the Difference?

If you’re exploring how to start a nonprofit or deepen your understanding of charitable structures, one of the most important distinctions to understand is the difference between a public charity and a private foundation. Though both are tax-exempt 501(c)(3) organizations recognized by the IRS, their structure, purpose, and compliance requirements are very different.

At iiCare, we operate as a public charity—built to serve the public, funded by broad support, and committed to direct community programming. Here’s a breakdown to help you understand which structure might be right for you—or how to better engage with nonprofits in either category.

What Are 501(c)(3) Types?

When starting a 501(c)(3) organization, the IRS generally classifies the nonprofit as a private foundation by default—unless the applicant can demonstrate why it should be classified as a public charity instead.

All 501(c)(3)s must meet these general criteria:

• They’re tax-exempt
• They must be organized for charitable purposes defined under Section 501(c)(3)
• They cannot engage in political action
• They cannot benefit private shareholders
• They must be organized as a corporation, unincorporated association, or trust

There’s also a lesser-known third category: private operating foundations. These hybrids mix the governance model of private foundations with the direct service delivery typical of public charities. However, they are uncommon and suited for unique situations.

What is a Public Charity?

A public charity is the most common type of 501(c)(3) organization. According to the IRS, more than 72% of active nonprofits fall into this category.

Key Characteristics:

• Receives broad financial support from individuals, corporations, foundations, and/or government grants
• Engages in direct charitable work (rather than grant-making)
• Must pass a public support test
• Board must be diversified and not composed of related individuals

Governance & Compliance:

• The board must have a majority of unrelated individuals (by family or business ties)
• Must file IRS Form 990 annually (variant based on revenue size)
  • Form 990: Revenue > $200K
  • Form 990-EZ: $50K–$199K
  • Form 990-N (e-postcard): Revenue < $50K

Examples:

• iiCare
• United Way
• YMCA
• Local schools, shelters, health programs

Where iiCare Fits In

As a fiscally sponsored initiative of the Social Impact Fund (SIF), iiCare benefits from full nonprofit compliance while operating as a public charity. We:

• Receive donations from individuals, sponsors, foundations, and corporate partners
• Deliver programs in health access, workforce development, financial literacy, and youth empowerment
• Operate under a transparent structure that enables multi-sector collaborations

What is a Private Foundation?

Private foundations make up a smaller percentage of 501(c)(3) nonprofits but often command large financial resources. These organizations are created to make grants to other charities rather than operate programs themselves.

Key Characteristics:

• Funded by a single source, such as a family, individual, or corporation
• Typically governed by related individuals (e.g., family members)
• Primarily focused on grant-making
• Required to distribute at least 5% of assets annually

Governance & Compliance:

• IRS recognizes nonprofits as private foundations by default
• Must file Form 990-PF, a more detailed and complex return
• Subject to strict rules on self-dealing, lobbying, and investments

Examples:

• Bill & Melinda Gates Foundation
• Ford Foundation
• Rockefeller Foundation

Key Differences: Public Charity vs. Private Foundation

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Which Type of 501(c)(3) Should You Start?

There is no universal answer—your decision depends on the mission, funding model, and level of public involvement you want.

Start a Public Charity If You:

• Want to run community programs directly
• Plan to raise funds from the public, grants, or government
• Prefer a more inclusive, independent board

Start a Private Foundation If You:

• Want to fund other organizations
• Have a family or corporate endowment
• Prefer to keep control among a small group of related individuals

Why iiCare Chose Public Charity Status

At iiCare, public charity status aligns with our community-driven mission. It allows us to:

• Be accountable to the public and our funders
• Qualify for grants and public/private partnerships
• Maintain transparency while growing rapidly under a trusted fiscal sponsor

We believe real change happens at the grassroots level—so our structure reflects that.

Final Thoughts

Whether you support a public charity or create a private foundation, both models can drive meaningful impact. What matters most is mission alignment, transparency, and the communities you intend to serve.

At iiCare, we operate with the public at the center of our purpose—and with a structure that makes sure every donated dollar leads to measurable opportunity.

Want to learn more or partner with us? Visit our contact page and let’s build something meaningful together.

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