This article is adapted from one in the Nonprofit Quarterly’s winter 2017 edition, “Advancing Critical Conversations: How to Get There from Here.”
Fiscal sponsors have been around for quite some time. These organizations provide a corporate umbrella to smaller groups—often, but not only, startups—so that they may receive funding without being overwhelmed by the administrative requirements of a stand-alone organization. Why might conversation about fiscal sponsorship be particularly important right now? In a time of active experimentation in terms of programs and organizational form, and in a context of some turbulence, the ability to test ideas without setting up formal organizations to hold them becomes increasingly important. One of the two articles to follow this in the next few weeks explores the fit of available fiscal sponsorship to that dynamic environment, and the other looks at the current state of the field.
So, again, context is an important component in the timing of this conversation—but the option of fiscal sponsorship over establishing a separate organization should long ago have been more in play. The fact is, after a certain developmental point, there is almost always a tense undercurrent between what is best for an institution versus what is best for its mission and constituents. This jockeying for the heart and soul of a nonprofit does not have to occur if you can test the waters first to gauge if you want and need a corporate setting for your work.
Frances Kunreuther wrote about the siren song of incorporation back in 2003, in an article titled “To 501(c)(3) or Not to 501(c)(3): Is That the Question?” Back then, Kunreuther wrote:
The decision about whether to incorporate is fundamental. Rather than assuming that incorporation is necessary, groups—and those who advise them—face the challenge of making a thorough and conscious decision about incorporation while being attentive to maintaining the vitality of the vision and mission of the work. So, to 501(c)(3) or not to 501(c)(3), that is an important question.
And then there is our social and organizational context, which seems every day to become more amenable to using common platforms for diverse efforts. In a way, being a fiscally sponsored organization is akin to being a donor-advised fund, where there is also no need for unnecessary structure of your own if, in fact, you can share corporate structure with no negative results and fewer costs, both financial and emotional.
Of course, in a strange confluence of trends, we are now in an era in which it is ever easier to be approved as a nonprofit, even if you have little to recommend you to that status.
Has the full-on formal organization gone the way of the dodo? Of course not. But is there a way that the nonprofit institution can sometimes own us in a way that is not necessarily good for the basic mission and effort? Absolutely.