Some of the nation's top grantmaking foundations do not have the word "foundation" in their names. Conversely, many nonprofit organizations that make no grants do. The difficulty of identifying grantmaking foundations by name alone creates confusion and produces misunderstanding about the scope and activities of the foundation field.

The Foundation Center defines a foundation as an entity that is established as a nonprofit corporation or a charitable trust, with a principal purpose of making grants to unrelated organizations or institutions or to individuals for scientific, educational, cultural, religious, or other charitable purposes. This broad definition encompasses two foundation types: private foundations and public foundations. The most common distinguishing characteristic of a private foundation is that most of its funds come from one source, whether an individual, a family, or a corporation. A public foundation, in contrast, normally receives its assets from multiple sources, which may include private foundations, individuals, government agencies, and fees for service. Moreover, a public foundation must continue to seek money from diverse sources in order to retain its public status. The term "public foundation" has come into common usage only recently to describe organizations in the subset of the public charity universe that operate grantmaking programs as a primary purpose.

The best way to identify private foundations is to refer to the formal determination made by the Internal Revenue Service. A nonprofit that has been legally established in one of the states must obtain recognition as a charitable organization from the Internal Revenue Service in order for contributions to it to be tax deductible.