As a forward thinker with a vision to better society, there’s no time to be bogged down by an administrative process. Sometimes the road to obtaining 501(c)(3) status is long and expensive. It’s important to know whether or not filing to become a 501(c)(3) is the best path for your group. Did you know that to file for status, you will need to form a board, create articles of incorporation, and $300-500 to cover the application? Remember applying doesn’t automatically mean approval either. For some groups, the 501(c)(3) status makes sense. For others it may be later down the line or never.
You can still make a difference and become a legitimate and sustainable non-profit by becoming one of the following instead:
- A Fiscally Sponsored Project.
Obtaining a fiscal sponsor is a smart alternative for many new groups. This means you’re essentially using the tax-exempt status of an existing agency to apply for grants. This path will allow you to test out your mission without bearing the administrative and bookkeeping weight. A fiscal sponsor is usually a 501(c)(3) organization that is long established and has the staff capacity to sponsor a start -up project. Most of the time, fiscal sponsors handle the financial administration of their project and have no say in the group’s activities. Many fiscal sponsors will offer you usage of their meeting rooms and office equipment. Sometimes employee benefits are extended to the staff of the fiscally sponsored project too.Of course, most fiscal sponsors charge a fee for these services. The average sponsorship fee is 9%-15% of incoming grants and donations. Most established non-profits don’t promote their fiscal sponsorship services, so it’s important to approach an organization directly if there might be a match. The Tides Center is a good example of a fiscal sponsor that has many projects it helps to incubate.
- A Collective or Network. If you have a group of dedicated people involved who volunteer their time consistently, you can promote the group as a “collective or network”. This route is definitely more grassroots. Even without a 501(c)(3) or fiscal sponsor, such groups are still eligible for limited amounts of funding. As a collective, there is power in the numbers. This route is best for groups who know that their work or projects will be more short term for 1- 5 years rather than 15 years.
The most vital step is to talk with the people involved in the organization to see what the long term goals are. In the eyes of donors and funders, it’s about the work and not your tax -exempt status. Figure out which structure will work best, and move forward with your vision.
