Key points about fiscal sponsorship from the conversation:
- A fiscal sponsorship allows a new project or group to operate under the legal and tax-exempt status of an existing 501(c)(3) nonprofit organization. This avoids having to incorporate separately and apply for 501(c)(3) status.
- The fiscal sponsor provides back office services like accounting, HR, legal compliance, and manages fundraising so the sponsored group can focus on programs.
- Sponsors typically charge an admin fee of 8-12% of funds raised. Some charge a % of expenses instead. This covers their management costs.
- Good for getting started quickly, building a track record, and testing an idea before launching a standalone nonprofit. Provides credibility.
- Downsides are less autonomy, fewer funding sources, can’t get some nonprofit discounts, and sponsors add rules/oversight.
- Suggested to use a fiscal sponsor if raising over $50k in first year or don’t have nonprofit management experience.
- Most sponsors want to help projects succeed and transition to independence. Process takes 3-6 months after getting 501(c)(3) status.
- Fiscal sponsorships should be the default first step before creating a new 501(c)(3) since it simplifies startup.
In summary, fiscal sponsorships allow faster startup in exchange for some autonomy but are a great way to incubate and test a new social impact idea.