{"id":2917,"date":"2017-11-02T10:44:59","date_gmt":"2017-11-02T14:44:59","guid":{"rendered":"https:\/\/www.harborcompliance.com\/blog\/?p=2917"},"modified":"2024-07-18T10:05:43","modified_gmt":"2024-07-18T14:05:43","slug":"pros-and-cons-of-fundraising-under-a-fiscal-sponsorship","status":"publish","type":"post","link":"https:\/\/www.harborcompliance.com\/blog\/pros-and-cons-of-fundraising-under-a-fiscal-sponsorship\/","title":{"rendered":"Pros and cons of fundraising under a fiscal sponsorship"},"content":{"rendered":"

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I\u2019ve assisted in founding two nonprofits, helping fill out Form 1023 to get the ball rolling with the Internal Revenue Service (IRS). The last organization I assisted was the <\/span>Chicago Brewseum<\/span><\/a>, which is looking to build the most comprehensive history of the brewing industry in the United States. During the initial stages, the founder was looking to start raising money and knew that obtaining IRS approval as a 501(c)3 could take a few months.<\/span><\/p>\n

One of the options we considered was a fiscal sponsorship and I wanted to share what I learned on what you should and shouldn\u2019t do in that period before officially going off on your own as a registered nonprofit with the IRS. Fiscal sponsorship isn\u2019t the only arrangement an entity can arrange before officially obtaining their own exemption; establishing a fiscal agency agreement is an option. However, we\u2019ll be concentrating on fiscal sponsorship as it’s the most common.<\/span><\/p>\n

What is a fiscal sponsorship?<\/span><\/h2>\n

If an organization doesn\u2019t have official approval from their state agency as well as the IRS to operate as a tax exempt entity, one option available is a fiscal sponsorship relationship with an established nonprofit. <\/span>Specifically<\/span><\/a>, \u201cA fiscal sponsor is a nonprofit organization that provides fiduciary oversight, financial management, and other administrative services to help build the capacity of charitable projects.\u201d <\/span><\/p>\n

There are pros and cons to going the fiscal sponsorship route outside of the fundraising needs we\u2019ll be detailing below. The organizing who is being sponsored gives up a fair amount of control around the access and usage of the money raised as well as administrative tasks like properly receipting donors. Neon One partner Harbor Compliance outlines this in detail in a companion piece to this blog, so check that out<\/a> if you haven\u2019t already.<\/span><\/p>\n

In general, the possibility exists to raise money in the same multi-channel approach that a fully registered nonprofit entity can do but with a fair amount of strings attached. \u00a0Let\u2019s unpack the most common scenarios here.<\/span><\/p>\n

Individual gifts<\/span><\/h2>\n

In general, if an organization declares their intent to become an IRS registered nonprofit and works out an agreement to <\/span>work with a fiscal sponsor<\/span><\/a>, they can begin raising funds from individuals. There are three main considerations that must be taken into account:<\/span><\/p>\n