Having an idea for a new nonprofit is not the same as actually starting it. In many ways, it’s just like starting a small business, including incorporation, hiring the right people, and selecting officers and the board of directors.
If you’ve been working on your ideas and are ready to take your startup nonprofit professional, but don’t have everything you need, there is a way for you to get going with a helping hand: a Nonprofit Fiscal Sponsorship.
The Nonprofit That Helps Yours
A Nonprofit Fiscal Sponsorship (NFS) is itself a nonprofit organization that can provide different types of assistance to startup nonprofits who don’t yet have a tax-exempt status, and aren’t ready to operate on their own. This is particularly important for the nonprofit that needs to start fundraising but can’t because they don’t have an IRS tax exemption. Having a fiscal sponsorship allows a nonprofit to begin fundraising without the long process of dealing with the IRS.
NFS can also help with individual projects, and can allow the project to take place without going through the process of starting a nonprofit for it.
If you’re wondering about how this works overall, think of it as operating one nonprofit out of the office of a bigger one. The bigger nonprofit helps the smaller nonprofit “up the steps.”
Other Functions Of A Fiscal Sponsor
Modern business now has the option of outsourcing many of its functions. Depending on the type of company, they can outsource business units such as Payroll, HR, IT, and their supply chain (including logistics.)
In the same fashion, nonprofits can outsource some of their back-office functions, or more, if they are a volunteer organization, to a fiscal sponsor.
Why Work With A Fiscal Sponsor?
There are several reasons why a new nonprofit would want to work with a fiscal sponsor for a while, even after becoming established.
- A fledgling nonprofit can leverage the fiscal sponsor’s tax ID status and other resources to pursue their mission without forming a new entity. Some nonprofits may choose to work with a NFS long-term before deciding to become their own entity. Others may continue to work under the NFS without separating.
- If your nonprofit hasn’t yet received its IRS tax exemption, it can still solicit tax-deductible donations by working under the NFS’s tax exemption, and have funding that it wouldn’t be able to have any other way.
- A nonprofit can let the fiscal sponsor take over their administrative work, including fundraising and other hands-on tasks
- You can begin working on the nonprofit’s mission, test its ideas, and learn whether there is a need for the services that it plans to provide to the public.
An NFS also exercises oversight over the new nonprofit’s fundraising and other operations.
In Chicago, Friends of The Parks is one NFS that’s available to area startup nonprofits. They offer assistance to interested nonprofits to get started. Their sponsorship renews annually, and costs $125 per year, with smaller “pass through fees” from time to time.
This article from Nonprofit Quarterly offers a more detailed overview about fiscal sponsorship.
Start Your Nonprofit And Find A Fiscal Sponsorship
Whatever your idea you have for bringing a service to the public, you really can start your own nonprofit in Illinois.
Attorney James C. Provenza has been working with nonprofits and their boards for over 25 years. He has the experience to eliminate oversights and omissions to ensure effective and functional bylaws, and help your nonprofit stay in compliance. Contact our office at (847) 729-3939 today. We look forward to helping ensure that your organization is successful.