Fiscal Sponsorship

What is a Fiscal Sponsorship?

Fiscal sponsorship is a formal agreement between a nonprofit organization (the sponsor) and a project or organization (the sponsored entity) that allows the sponsored entity to operate under the sponsor's tax-exempt status. This arrangement enables the sponsored entity to receive tax-deductible donations and grants without having to establish its own 501(c)(3) status.

There are generally two main types of fiscal sponsorship:

1. Type 1 Sponsorship (Comprehensive Sponsorship):
2. 1. In this model, the sponsored project is a part of the sponsoring organization. The sponsor has full control over the project, and the project is considered an integral part of the sponsor's operations. This type of sponsorship is often used for projects that align closely with the sponsor's mission.
3. Type 2 Sponsorship (Pre-Approved Relationship):
4. 1. In this model, the sponsored entity operates independently but is still under the umbrella of the sponsor's tax-exempt status. The sponsor agrees to receive and manage funds on behalf of the sponsored entity, which retains more autonomy in its operations. This type is often used for projects that may not fit neatly within the sponsor's mission but still require tax-exempt status for fundraising. This is the most common type used by Legacy Global Programs.

Key Characteristics:

1. Funds are owned by the Sponsor
2. 1. A Sub-Fund account setup underneath a Sponsoring Organization such as Legacy Global Programs. 
3. Mission Restricted
4. 1. The donated funds must be used for the intended charitable purpose which we call a Mission Statement. For example: Funds raised for the 'Save The Dogs' fund will not be used to Cure Cancer (Unless it's specifically Canine cancer).
5. Donations
6. 1. Donors can fund the FSP through personal donations or donations from other persons/organizations. These donations usually come in via online donations, but other methods can be used as well.
7. Operational
8. 1. FSPs are operating charities actually performing the charitable work. The funds get used to pay for operations. For example: the 'Save The Dogs' fund might use donations to purchase dogfood or run a local animal shelter.
9. Tax Free
10. 1. FSP funds can be raised tax free until they are used to pay a non-qualified party.

Fiscal sponsorship can be beneficial for new initiatives, allowing them to focus on their mission and activities without the administrative burden of maintaining their own nonprofit status. However, it also means that the sponsored entity must adhere to the sponsor's policies and procedures, and the sponsor retains some level of oversight and control.

Benefits of a Fiscal Sponsorship?

Fiscal sponsorship offers several benefits, particularly for nonprofit organizations and projects that may not have the resources or infrastructure to operate independently. Here are some key advantages:

1. Tax-Exempt Status:
2. 1. Fiscal sponsors such as Legacy Global Programs have public 501(c)(3) tax-exempt status, allowing sponsored projects to receive tax-deductible donations. This can significantly enhance fundraising efforts.
3. Administrative Support:
4. 1. Fiscal sponsors often provide administrative services, including accounting and compliance, allowing project leaders to focus on their mission rather than administrative tasks.
5. Access to Funding:
6. 1. Many foundations and grant-making organizations prefer to fund established nonprofits. A fiscal sponsorship can open doors to funding opportunities that may not be available to unincorporated projects.
7. Reduced Overhead Costs:
8. 1. By sharing resources with a fiscal sponsor, projects can reduce overhead costs associated with running a nonprofit, such as insurance, legal fees, and office space.
9. Credibility and Legitimacy:
10. 1. Being associated with a recognized fiscal sponsor can lend credibility to a project, making it more attractive to potential donors and partners.
11. Networking Opportunities:
12. 1. Fiscal sponsors often have established networks and relationships within the nonprofit sector, providing sponsored projects with valuable connections and collaboration opportunities.
13. Flexibility:
14. 1. Fiscal sponsorship can offer a flexible arrangement that allows projects to test their ideas and grow without the immediate pressure of establishing a standalone nonprofit.
15. Compliance and Legal Guidance:
16. 1. Fiscal sponsors typically provide guidance on legal and regulatory compliance, helping projects navigate the complexities of nonprofit law.
17. Shared Resources:
18. 1. Sponsored projects may benefit from shared resources, such as office space, technology, and staff, which can enhance operational efficiency.
19. Focus on Mission:
20. 1. With many administrative burdens lifted, project leaders can concentrate on their mission and programmatic work, leading to greater impact.

Overall, fiscal sponsorship can be a strategic way for emerging nonprofits and projects to gain stability, credibility, and support while they work towards their goals.

Why A Legacy Fiscal Sponsorship?

1. The Legacy Family
2. 1. The Legacy Family is a group of independent charities and organizations that work together to help organizations, families and individuals maximize their positive impact on the world and communities around them. This family of charities enables us to solve your most complex problems.
3. Flexibility
4. 1. Legacy specializes in doing the custom and complex giving that most other charities cannot or will not handle. Through a combination of our concierge approach, The Legacy Family, and our expertise, you won't find a better team than us to help accomplish your dreams in a competent and compliant way.

How to get started?

Setting up a Fiscal Sponsorship (FSP) is a straightforward process. Here’s a step-by-step guide to help you set up a FSP:

1. Research
2. 1. Understand what Fiscal Sponsorships are.
   2. What can a FSP do?
   3. What can't a FSP do?
   4. Pros and Cons?
3. Complete the application process.
4. 1. Meet with us an discuss your goals & priorities so we can help carry them out in the best manner. We want to make sure that a Legacy FSP is the right fit for you and your needs.
   2. Craft the Mission Statement
   3. 1. This is the stated purpose of the FSP and the legal restriction on how the funds will be used.
      2. Legacy will help you craft one that works well with the applicable guidelines and regulations.
      3. We recommend specifying 'What' you want to accomplish, but not 'How' so you have some future flexibility to adapt.
   4. Sign the paperwork.

Set Up A Fiscal Sponsorship

I Set Up A Fiscal Sponsorship... Now What?

Using a FSP can be fairly simple, but it usually takes some time to get everything set up right. There is no one size fits all sponsorship and therefore our solutions can't be one size either. Legacy will work with you to get things operating in the manner that's best for your program.

Here are some common steps most FSPs need to make:

1. Raise Funds
2. 1. Legacy can create a payment processor account to receive donations to the FSP
   2. 1. This processor account can be added to the sponsored organizations website to accept donations.
   3. Individuals and Organizations can also Donate Directly.
   4. 1. Legacy will provide instructions on how persons or organizations can make direct donations after the documents are signed.
3. Use The Funds
4. 1. Do the work.
   2. 1. For example: The 'Save The Dogs' fund might go rescue and rehabilitate abandoned puppies.
   3. Use the money to pay for the work.
   4. 1. For example: The 'Save The Dogs' fund will need to buy food, pay for shelter, potentially hire staff, pay veterinarians, etc.
5. Reports and Compliance
6. 1. Legacy handles the reports and compliance required to maintain charitable status. But to do so we may need certain documents or reports from you. Legacy will work with you to craft the reports and documents that your specific project needs to stay compliant.

To make any use of funds request you can go to our Legacy Gateway.

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