DEFINITION of 'Private Foundation'

A charitable organization that, while serving a good cause, does not qualify as a public charity by government standards. A private foundation is a nonprofit organization which is usually created via a single primary donation from an individual or a business and whose funds and programs are managed by its own trustees or directors. As such, rather than funding its ongoing operations through periodic donations, a private foundation generates income by investing its initial donation, often disbursing the bulk of its investment income each year to desired charitable activities.

BREAKING DOWN 'Private Foundation'

Private foundations generally fit into two categories: private operating foundations and private non-operating foundations. Private operating foundations actually run the charitable activities or organizations they fund with their investment income, while private non-operating foundations simply disburse funds to other charitable organizations.

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