A public benefit corporation that files for tax-exempt status under 501(c)(3) to the IRS is further classified into one of two categories: public charities and private foundations. The two classifications differ in the amount and type of paperwork that must be filed to the IRS, and you can read up further on the specifics on the Life Cycle of a Public Charity/Private Foundation page from the IRS.
- A public charity normally receives a substantial part of its income, directly or indirectly, from the public or from the government.
- A private foundation receives a substantial part of its income from investments and endowments. The income is used to make grants to other organizations, rather than being applied directly to a charitable activity.