Comparing Operating and Non-Operating Foundations

If you’re contemplating establishing a private foundation in order to run charitable programs, it might be unclear whether an operating or non-operating foundation would be the best choice. You might assume that an operating foundation would make the most sense if you primarily want to engage in some kind of “hands-on” work, such as running a food bank. However, there are excellent reasons why you might prefer a non-operating foundation instead.

First, it helps to understand how operating and non-operating foundations compare. All private foundations share these commonalities:

There are, however, significant differences between the two distinct categories of private foundations. At the most basic level, the primary difference between non-operating foundations and operating foundations is the extent to which a foundation’s resources and operations are dedicated directly to charitable activities and services, and whether such operations are carried on continuously or merely sporadically.