Reasons to Choose Fiscal Sponsorship

You have an important charitable project or cause, and it’s time to take it to the next level. Maybe your cause is still in the idea phase or it’s further ahead and you already have donors. Perhaps you are really skilled at serving the direct mission, but not as able to efficiently run the bookkeeping and administration. You need structure and tax-exempt status, and you needed it yesterday. 

This is where Ribbon can help. Ribbon can enable your charitable organization through the fiscal sponsorship process.

What is Fiscal Sponsor and Fiscal Sponsorship?

Simply put, a fiscal sponsor is an established nonprofit that partners with causes to help them accomplish their goals. The project operates under this sponsorship and among many benefits, enjoys the sponsor’s tax-exempt status.

More formally put, the sponsor is a 501(c)(3) organization that takes nonexempt projects or causes under its umbrella and ‘sponsors’ them in an arrangement called fiscal sponsorship. 

This provides the sponsored group or project 501(c)(3) ‘status’ so that they can start tax-deductible fundraising activities quickly.

If you’ve started to research the best way forward, you have likely bumped into the option to register formally as your own 501(c)(3) nonprofit organization. This can be a good route for many, but the time, costs, operational management, financial oversight, and compliance requirements might be deterrents to registering formally on your own. 

Despite having key differences, 501(c)(3)s and fiscal sponsorships share one crucial thing in common: both are allowed to receive tax-deductible donations.

Read more about the difference between operating under a 501(c)(3) through fiscal sponsorship versus registering as your own 501(c)(3).  

The Many Benefits of Fiscal Sponsorship

When deciding whether or not to choose a fiscal sponsorship model for your organization or charity, you should consider a variety of factors including risk, startup time and money costs, efficiency, and flexibility.

Low Risk

Fiscal sponsorship can be a great option for charitable groups and projects looking to test the waters, and run a charitable venture, without having to jump into a formal 501(c)(3) registration process. Under the umbrella of a fiscal sponsor, projects have the freedom to work on the mission directly, secure that their cause is not at risk, as the sponsor has handled compliance requirements.

Save Time and Start Sooner

With fiscal sponsorship, your project can be up and running quickly in a turn-key sponsorship process. Because the sponsor is already an established 501(c)(3), they have the infrastructure in place to support your operation, so you can focus on your cause. If you choose sponsorship, your charitable project could be up and running in minutes instead of months.

Flexible

Fiscally sponsored causes can operate under the sponsor indefinitely, or for a short term. If your project is short-term, you might enjoy the flexibility and be able to extend the cause as needed. An example would be a project that provides free Thanksgiving meals in November and then extends the program to also provide free Christmas meals in December. In both short and long-term projects, fiscal sponsorship offers the ability to scale up or down.

Save Money

Traditional nonprofit start-up costs might be a barrier to your project getting off the ground, not to mention ongoing compliance fees and administrative overhead costs. Your cause can save thousands under fiscal sponsorship, as the sponsor is an established vehicle for managing back office operations and compliance costs. 

Efficiency & Effectiveness

Operating under the structure of a fiscal sponsor allows your project to run more efficiently. Sponsored projects benefit from not being weighed down by financial management tasks, tedious record keeping, fund disbursement, and reporting. The fiscal sponsor lends the expertise and oversight to manage these functions through sponsorship services. Your cause will be more effective in driving the mission when you have a fiscal sponsor to manage time-consuming operational requirements. 

Here’s what Nonprofit Quarterly says about Fiscal Sponsorship

“When done right, fiscal sponsorship is a valuable alternative to starting a nonprofit that produces private and public efficiencies through shared administration and fewer nonprofits requiring fiduciary and regulatory oversight.”

There are many reasons to consider fiscal sponsorship. If your project needs to get off the ground quickly and would benefit from administration, oversight, and compliance support then consider fiscal sponsorship with Ribbon.