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A charitable trust functions as a dedicated fund where assets from a donor, or grantor, are legally entrusted to a trustee. This trustee then has a fiduciary duty to administer these assets in support of a designated charitable cause. Its defining characteristic, unlike a private trust, is that it serves a broad public benefit—like advancing education or environmental protection—instead of being for the financial gain of specific people. Typically, these trusts are set up to be irrevocable and can operate in perpetuity, ensuring the philanthropic vision of the founder is sustained long-term.

Starting a non-profit involves several key legal steps. First, you must incorporate the entity by filing official documents, such as Articles of Incorporation, with the appropriate state agency (like the SEC). At the same time, you must draft and adopt bylaws, which are the internal operating rules for the organization, and appoint an initial board of directors. After incorporation, the most critical step is to apply to the national tax authority (like the BIR) for official recognition of tax-exempt status.

A non-profit’s board of directors is bound by three core fiduciary duties. The Duty of Care requires making diligent, informed decisions in the organization’s best interest. The Duty of Loyalty demands that directors put the non-profit’s interests ahead of their own, strictly avoiding any conflicts of interest. Finally, the Duty of Obedience obligates the board to ensure the organization remains faithful to its charitable mission and complies with all applicable laws and regulations.

The main legal distinction lies in their source of funding and, consequently, how they are regulated. A public charity receives a significant portion of its financial support from the general public, the government, or a wide variety of donors. A private foundation, on the other hand, typically derives its principal funding from a single individual, family, or corporation. Because they are less publicly accountable through their funding, private foundations often face stricter operating rules and regulations.

The tax benefits are twofold. For the organization, obtaining official non-profit status from the government means it is generally exempt from paying corporate income tax on revenues related to its mission. For donors, contributions made to a qualified non-profit organization are typically tax-deductible. This allows individuals and corporations to reduce their own taxable income, creating a significant financial incentive to support charitable causes.