To most of the public, the definition of a nonprofit or charity is the one used to describe 501(c)(3) organizations. In other words, organizations that solicit and spend tax-exempt and tax deductible funds "for the public good."
Actually there are several subsections of section 501, and how you file your initial paperwork can substantially change the funding landscape for you.
For some of the differences, check out this chart.
Lately, I have run into several organizations self-described as foundations and approved as 501(c)(4) entities that want to apply for grants from other foundations.
In most cases, I don't quite understand why they chose that subsection to file under, but that's a topic for another post.
If you are wondering "what's the difference, we are still a charity " then you might not understand why foundations reject your grant applications and donors don't support you.
One major difference is that donations to a (c)4 are not tax deductible, and you are legally required to state that fact prominently on all your publications asking for support.
While tax deductibility in and of itself is not the major reason people donate, the lack of that component can lead casual donors to question whether their money will be used for charitable purposes or political lobbying.
As far as major foundation and corporate donors are concerned, the (c)4 can legally only access funds from other charitable organizations under certain well-defined conditions.
That means that (c)4's are far more dependent on developing their donor base one-on-one than their (c)3 counterparts, meaning that grants are usually not part of the fund-raising equation.
Fundraising for a (c)4 may involve more donor education to attract individual donors.
Particularly since the flap about the IRS targeting (c)4's for their political activities, donors need to be told why your foundation is problem-centered rather than politically centered, assuming of course that is the case.
Other types of fundraising that are typically more productive are things like black-tie events, one-on-one donor meetings, social media campaigns, website donation capability, direct mail, phone campaigns and email solicitations.
You can combine events with a (c)3, as long as the donations are clearly separated. You can rent an email-list from (c)3's, but it must be rented at fair market value (typically .10 to .40 cents per name).
If your mission and that of a public charity are aligned in some way (for instance a research mission to find a cure for cancer could combine with a public charity seeking funds for respite care for cancer victim caretakers), the (c)3 might welcome your participation.
A major donor cultivation program is essential to access larger lump-sum donations. Just be aware that currently donors are limited to a $13,000 a year limit.
It is absolutely essential that your board participate in fundraising efforts. Even more than usual, (c)4 fundraising is more about who you know than what you know.
Some (c)4's are spin-offs from(c)3's and vice versa. If your organization is having a lot of trouble fundraising, you might want to consider converting to or adding a (c)3, again assuming that your primary mission is not political.