What is Fiscal Sponsorship?
Starting an organization from scratch can be a challenging
Fiscal sponsorship allows organizations to operate under the umbrella of an established nonprofit, giving them access to fundraising without the burden of setting up a stand-alone nonprofit entity. This alternative pathway to starting a nonprofit also allows organizations to seek grants and solicit tax-deductible donations under the sponsor’s tax exempt status.
The Two Most Common Types of Fiscal Sponsorship
Model A:
Comprehensive Sponsorship
Your sponsor is the one who receives funds and pays out expenses directly. They employ the staff and carry the insurance for the fiscally sponsored organization. The sponsored organization does not have any separate legal entity – they are considered a program of the sponsor.
Model C:
Pre-Approved Grant
The fiscal sponsor receives and re-grants funds to a separate legal entity (LLC or non-stock corporation without a 501c3) to further a charitable purpose. The sponsored organization is responsible for employment, taxes, and insurance.
Beyond a transactional relationship
An excellent fiscal sponsor offers far more than a transactional relationship. They can also offer coaching, support, and guidance. This strategic and administrative support is just as crucial as the fiscal support. With deep knowledge of their area and the nonprofit sector, a fiscal sponsor can help you refine your strategy, connect you with key stakeholders, and provide insights into best practices for managing your organization. While the sponsor provides accounting, tax filing, HR, health benefits, and insurance, organizations can focus on programming, fundraising, and developing a proof of concept.