Four Types of Charity Explained: Public, Private, Community & Donor‑Advised

When you hear the word “charity” you probably picture a fundraiser or a food drive, but the legal world splits charities into four distinct categories. Knowing the difference helps donors pick the right vehicle, guides new founders on how to structure their mission, and clears up tax‑benefit questions.

Quick Takeaways

• Charities fall into four groups: public charities, private foundations, community foundations, and donor‑advised funds.
• Public charities rely on broad public support and must meet a public‑interest test.
• Private foundations are funded by a single donor or family and operate mainly through grantmaking.
• Community foundations pool donations for a region, supporting local projects and managing endowments.
• Donor‑advised funds let individuals direct charitable grants while retaining tax advantages.

Below we break down each type, compare their key attributes, and show how you can match your goals to the right structure.

What is a Charity?

Charity is a nonprofit organization that exists primarily to serve the public good, whether through relief, education, health, arts, or other social benefits. In many countries charities must register with a regulator (for example, the Charities Register in New Zealand or the IRS in the United States) and meet specific reporting standards. The classification into four types reflects how the organization raises money, who controls it, and what activities it can perform.

1. Public Charity

Public charity is a charitable organization that receives a substantial portion of its support from the general public, government grants, or a broad base of donors. Because its funding comes from many sources, the IRS (in the U.S.) requires a public‑interest test: at least one‑third of the charity’s revenue must come from public contributions or it must meet a 5‑percent public support threshold over five years.

Typical examples include food banks, disaster‑relief agencies, and churches that rely on congregational giving. These groups often run programs directly for beneficiaries and can also engage in advocacy as long as it aligns with their charitable purpose.

Key traits of public charities:

• Broad donor base - individuals, businesses, and government.
• Higher public visibility - fundraising events, campaigns, and volunteer drives.
• More flexible use of funds for program services.

2. Private Foundation

Private foundation is a charitable entity funded and controlled by a single donor, family, or corporation, primarily engaged in grantmaking rather than direct service delivery. The classic example is the Bill & Melinda Gates Foundation. Private foundations must distribute at least 5% of their net investment assets each year, a rule designed to keep the capital active.

Because they draw from a limited pool of donors, private foundations enjoy greater autonomy in setting grant priorities. However, they face stricter reporting, higher administrative costs, and a prohibition on self‑dealing.

Key traits:

• Single or family donor control.
• Focus on grantmaking and long‑term strategic impact.
• Mandatory annual payout of 5% of assets.

3. Community Foundation

Community foundation is a public‑charity‑type organization that pools donations from many donors to serve a specific geographic area, managing endowments and grant programs for local needs. A well‑known example is the New Zealand Community Trusts network, which supports regional projects ranging from cultural festivals to environmental restoration.

Community foundations act as a “donor‑service center.” They help individuals set up charitable funds, handle tax paperwork, and then allocate grants based on community priorities. Their ability to draw on a broad donor pool while focusing on local impact makes them a bridge between big philanthropy and grassroots needs.

Key traits:

• Geographically focused - city, region, or state.
• Provides donor‑advised and restricted funds.
• Managed by an independent board representing the community.

4. Donor‑Advised Fund (DAF)

Donor‑advised fund is a giving vehicle administered by a public charity where donors make irrevocable contributions, receive immediate tax deductions, and later recommend grants to other charities. Popular sponsors include Fidelity Charitable and the Canada‑based Canada’s Donor‑Advised Fund platform.

Once you fund a DAF, you can advise on grants for years to come, allowing you to time your charitable impact strategically. The sponsoring organization handles all due‑diligence, record‑keeping, and tax reporting.

Key traits:

• Immediate tax deduction at contribution.
• Flexibility to choose grant timing and recipients.
• Low administrative overhead for the donor.

Side‑by‑Side Comparison

Choosing the Right Structure for Your Mission

Ask yourself three quick questions:

1. Who will fund the organization? If you expect many small donors, a public charity or community foundation fits best. If a single family or corporation will bankroll it, a private foundation is the natural choice.
2. Will you run programs directly or grant to others? Direct service delivery points to a public charity; strategic grantmaking leans toward a private foundation or community foundation.
3. Do you want flexibility in timing your donations? A donor‑advised fund offers the most control over when and where money goes, while still giving you an immediate tax break.

Legal counsel can help you file the appropriate paperwork-Form 1023 for U.S. public charities, Form 1023‑EIN for private foundations, and similar registration processes in New Zealand (Charities Register with the Charities Services).

How to Support Each Type

Regardless of the structure, charities need both money and hands.

• Public charities: Volunteer at events, run peer‑to‑peer fundraisers, or give recurring monthly gifts.
• Private foundations: Seek grant applications, attend board meetings if you’re a trustee, or partner on research projects.
• Community foundations: Contribute to a regional fund, help promote local grant opportunities, or sit on advisory committees.
• Donor‑advised funds: Set up a DAF, make a lump‑sum contribution, and then recommend grants throughout the year-ideal for year‑end tax planning.

Common Pitfalls and Pro Tips

Nonprofit organization is a entity organized for public benefit and exempt from paying income tax on earnings related to its mission. Confusing a nonprofit’s tax‑exempt status with its charity type is a frequent mistake. Here’s how to avoid it:

• Don’t mix public‑interest tests with private foundation rules. Each category has its own compliance calendar.
• Keep grantmaking records clean. Private foundations must file Form 990‑PF, showing every grant recipient and amount.
• Watch out for self‑dealing. Foundations cannot make grants that benefit insiders directly.
• Leverage community foundations for local impact. They often have deep knowledge of regional needs that a national public charity may miss.

Frequently Asked Questions

Understanding the four charity types equips you to make smarter giving decisions, set up a new nonprofit on solid footing, or simply talk about philanthropy with confidence. Whether you’re a first‑time donor, a family looking to start a legacy fund, or a community leader seeking local impact, the right classification makes all the difference.