As a nonprofit lawyer, I spend a ludicrous amount of time talking people out of forming nonprofits. If founding a successful, impactful nonprofit were easy, everyone would be doing it! Unfortunately, that logic does not deter the majority of prospective nonprofit founders that call our offices. Often what we read between the lines goes something like this:
Create a Nonprofit – Attract Lots of Funding
Whenever I hear this, I can’t help but think of the South Park underpants gnomes and their awesome business plan: Collect Underpants †’ ? †’ Profit
Finding support and funding in the nonprofit world is often more challenging than finding funding for a for-profit venture. In addition, contrary to the belief of many nonprofit founders, foundation grant dollars do not grow on trees and are, in fact, the most competitive and scarce source of funding available.
Nonprofit founders typically form their nonprofit, build the board, apply for tax-exempt status, and create an infrastructure before they have ever tested their ideas.
Due to the IRS’ lengthy and burdensome application for exemption process, more time and resources go into the typical nonprofit start-up than a for-profit start-up. For that reason, we feel these founders have it backward. If your nonprofit business plan has not already attracted support and funding, consider finding a fiscal sponsor first.
Finding a Fiscal Sponsor
While some nonprofit founders have hit on innovative ideas to fill existing community needs, others seem to believe 501(c)(3) status will automatically attract grants and donations and ensure their success. Fiscal sponsorship permits would-be nonprofit founders to test their ideas and find out whether their ideas will produce results and attract support before they invest significant time and resources into building an entire organization around those ideas.
Fiscal sponsorship also allows an experienced partner to handle the often tedious nonprofit accounting and compliance issues while the nonprofit founder focuses on building programs.
So, if you are considering founding a nonprofit to conduct a program you have not yet tested or found meaningful support for, stop stealing all the underpants and consider partnering with a fiscal sponsor.
Ellis Carter is a nonprofit lawyer with Caritas Law Group, P.C. licensed to practice in Washington and Arizona. Ellis advises nonprofit and socially responsible businesses on corporate, tax, and fundraising regulations nationwide. Ellis also advises donors with regard to major gifts. To schedule a consultation with Ellis, call 602-456-0071 or email us through our contact form.