This week, we’re interviewing fiscal sponsorship specialist Andrew Schulman, Founder of Schulman Consulting, a unique practice dedicated to assisting nonprofit leaders understand and navigate the world of fiscal sponsorship – a subject most of us have heard of but aren’t totally sure how it works. For more on the basics of fiscal sponsorship, take a look at this primer.
I’m ready to start my own nonprofit. Should I get a fiscal sponsor or go ahead and file for our own tax status? What considerations do I need to take into account?
This always comes down to a very personal, individual decision and should be based on your goals and fit (see below), but here are a few other considerations to think about:
- Have you previously founded and/or managed other nonprofit organizations?
- Do you have relevant experience in one or more of the following areas: a) the service you plan to deliver, b) fundraising to support that service, or c) the initial and on-going state and federal reporting requirements for nonprofits?
- Are you an experienced manager with the ability to juggle multiple activities that use very different parts of your brain at one time?
If you answered ‘yes’ to any of the above, Congrats! You’re starting with a deeper foundation than most. But, even if you answered ‘yes’ to all of the above, fiscal sponsorship may be a good route for you to explore – if you’re willing to work with an experienced partner to help bring your organization to life.
What makes a good fiscal sponsor?
This is really two separate questions.
First, does the sponsor operate using best practices that are transparent and compliant with applicable regulations? This is a pretty simple question to answer once you ask a sponsor some key questions (Here’s a good discussion on that).
Second, “Is this a good fiscal sponsor for me and my project?” Some of the key areas you should consider are in answering this question are:
- Does this sponsor’s mission share my organization’s mission and goals?
- Can I work with this sponsor’s staff on a regular basis? (Since you will be)
- Does this sponsor provide the types of levels of services and support that I believe I need to launch and grow my organization?
If you can confidently, and positively, answer these questions, you’ve likely found a good fit. (Here’s a great article on this topic.)
Working with a fiscal sponsor can seem very simple, but there are many complexities to keep in mind. What not so exciting things should I anticipate?
Running a nonprofit, whether it’s an independent 501(c)(3) or through a fiscal sponsor, will have its fair share of “not so exciting things.”
Specific to fiscal sponsorship, many project leads chafe at seeing the administrative fees charged to their bank account every month – although they are using getting way more value in services and support than they are actually paying for.
Beyond that, a sponsor’s specific processes and procedures (and standard turnaround times) for regular activities like funds requests, contract reviews and financial reporting can be seen too slow or more complicated than necessary.
These are understandable feelings and frustrations but it’s important to remember that fiscal sponsorship is a partnership between the project and the sponsor and there are (in the vast majority of cases) very good reasons behind why your sponsor operates the way that they do.
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