Many people have amazing ideas for creating a nonprofit or public-benefit project, but aren’t sure how to get started or find funding. Instead of starting a new organization, you may want to consider working with an existing 501(c)(3) public charity under a formal arrangement known as fiscal sponsorship. We’re sharing all you need to know about fiscal sponsorship to help you decide if this is the right fit.
Fiscal sponsorship is when a nonprofit organization agrees to assume legal and financial oversight for a charitable activity or project that does not have its own tax-exempt status. When you have a fiscal sponsor, your donors make tax-deductible donations to your sponsor, noting that the funds are intended for your project. Then, the sponsor passes the money to you and typically keeps a fixed amount (or percentage) for administrative services.
Starting a nonprofit requires a lot of work, including IRS and state applications and extensive annual reporting. F iscal sponsorship may give you access to a team of dedicated professionals who handle your accounting, grants management, human resources, administration, and other needs. Not only does this make your life easier so that you can focus on your mission, it’s also less expensive and risky than operating as an independent organization. Perhaps most importantly, grantmakers typically only fund nonprofit organizations, not individuals or individual projects, so fiscal sponsorship can help you qualify for a wider range of funding opportunities.
We recommend checking out these Candid resources to decide if a fiscal sponsor is right for you:
The best place to start is to look at your current affiliations and approach organizations that you are already associated with to see if they would act as your fiscal sponsor. Organizations that know you and your work may be more willing to act as your sponsor.
If you don’t have any connections, look for a nonprofit organization with a mission similar to yours and reach out to see if they would consider sponsoring your project. Candid’s GuideStar is a great place to look for nonprofits by location and mission. You can also try asking colleagues for recommendations.
Some organizations that provide fiscal sponsorship are:
One common question we get is whether there is a directory of fiscal sponsors and the answer is yes! The Fiscal Sponsor Directory allows you to search for nonprofit fiscal sponsors by state, service category, and keyword. However, the number of sponsors in the directory is limited so if you don’t find one there, try some of the suggestions above. You can also read Candid’s blog for more tips on finding sponsors.
When approaching prospective fiscal sponsors, be ready to give a project proposal that explains:
Check out our proposal writing resources for help creating your project proposal.
To learn more, visit Candid’s knowledge base for the full article on fiscal sponsorship.
Have a question? Ask our team of online librarians at [email protected] or via chat (available 9:30 a.m. to 5 p.m. ET, Monday-Friday).
The information provided in this article is intended to offer general guidance on fiscal sponsorships. Candid recommends consulting with an accountant or financial consultant for detailed assistance.
