Ready to formalize your project, but don't know what a 501c3 and fiscal sponsorship? They're your two options that make your project legally official. A 501c3 is an independent organization. A fiscal sponsor is a 501c3 that lends their legal status to your project. There are ups and downs to both- so take a look and see which fits best for you!

501c3 and Fiscal Sponsorship

1. Know your options. Incorporating and getting 501(c)(3) tax exemption are two separate processes.
2. Be prepared to manage a 501(c)(3) status. Obtaining and maintaining 501(c)(3) status is a lot of work on an ongoing basis. You need a board and an accountant to be able to do it.
3. Know the benefits of both. Tax-exemption for both statuses means that you don’t have to pay federal corporate income taxes and donations to your organization are deductible for the donor.
4. Determine your long-term and short-term plans. Fiscal sponsorship can be a temporary step in the process of gaining 501(c)(3) or it can be a long term plan.
5. Clarify your project status There are different kinds of fiscal sponsorship: in some cases you are a “project” of the sponsor organization and in some cases you are truly a separate entity. One of the main factors that makes the difference is whether you are incorporated.
6. Establish your relationship If you have a fiscal sponsor, you should have a written fiscal sponsorship agreement.
7. Prepare if you are moving onto 501(c)(3)status. Donors have a lot of control in a fiscal sponsorship situation, especially if disputes arise as you are trying to separate.
8. Don't forget your state tax forms. Always apply for state tax exemption along with your federal tax exemption or you could get hit with lots of state penalties!
9. Be aware of your restrictions. With either status, you will be prohibited from engaging in political activity, and your mission and operations must be charitable. The restrictions may depend on the sponsor.
10. Seek a fiscal sponsor that is a match Find a sponsor who shares your purpose. Ask if they will agree to support your activity and charge less as a fiscal sponsor. Some may charge in the range of 7-15% of sponsored funds.
11. Contact your local legal services organization. To get more help, contact your local legal services organization, bar association, or check out fiscal sponsor resources.