Why Fiscal Sponsorship is a Great Way to Start a Nonprofit

We interview  Andrew Schulman, founder of Schulman Consulting an expert in dealing with Fiscal Sponsorships. Here are some of the largest fiscal sponsors if you want to get started. 

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.