These are some frequently asked questions about fiscal sponsorship with the Arts & Business Council that have come up over time. These are general answers and your project’s fiscal sponsorship agreement may contain specific provisions that are a little different. In all cases, the signed Fiscal Sponsorship Agreement is the binding document. Please do not hesitate to get in touch with us at firstname.lastname@example.org if you have any questions about how fiscal sponsorship works.
This alternative to starting your own nonprofit, or by using a fiscal sponsor while waiting for your organization’s determination to come back from the IRS, allows you to seek grants and solicit tax-deductible donations under the sponsor’s exempt status. Using a fiscal sponsor, a non-exempt individual, project, event, or organization can take advantage of a lot of the benefits of a tax-exempt nonprofit organization.
Legally, any existing tax-exempt nonprofit organization can act as a fiscal sponsor but, because of the legal complexity and administration required, not all nonprofits will do so. If you’re looking for a fiscal sponsor, it’s best to partner with an organization with which you have a good relationship, and/or one that has an existing fiscal sponsorship program. Organizations also offer different types of sponsorship agreements or relationships, so make sure to do your research on what will be the best fit for your project.
- Qualifies the project for some grants and funding that would otherwise be inaccessible;
- Accepts and safeguards charitable donations in a restricted fund on behalf of a project;
Takes on legal liability for those funds;
Creates and maintains some accounting records for the project;
- Commits to timely reporting on the restricted project funds to your project leaders;
- Communicates as necessary and appropriate with your project’s donor(s), institutional grantmakers, or funding agency(ies) in ways that supplement your project leader’s communications; and
- Brings experience to the project and may provide additional aids such as administrative services and/or strategic planning assistance.
Fiscal sponsorship is a good solution for organizations (or certain individual projects or events) that only want to do a few small projects over a specified period of time, those who don’t have the time or staff for a lot of organizational administration, or those who need to be able to receive tax-deductible donations while they wait for separate 501(c)(3) nonprofit status approval from the IRS. Of note, in a Model C relationship, the sponsor only funds projects to the extent that the project is able to raise its own funds.
Don’t wait until the last minute to tell us you need the letter or other materials for the funder you are approaching with a full proposal. We request at least two weeks of advance notice. However, when a funder asks for your organization’s budget, financial statement, Board of Directors, or other materials – what they really want is your information, not the Arts & Business Council’s.
A “nonprofit purpose” means that the organization or project’s mission comes before any individual’s advancement or profit motive. That mission must also be in service of some aspect of the public good.
The Arts & Business Council can sponsor sole proprietorships, nonprofit corporations, or single-member LLCs that are nonprofit in purpose and meet all other eligibility requirements. We cannot manage funds meant for for-profit purposes and will not manage funds on behalf of for-profit corporations (S and C corps) or S, C, or P classification LLCs.
- Manage your project’s tax, HR, filing, and liability issues
- Properly recognize the Arts & Business Council as your fiscal sponsor on all fundraising and marketing materials, including your website and social media
- Provide the Arts & Business Council with all communication with funders (proposals, letters of inquiry, etc.) for approval
- Provide detailed financial information to support all requests for funds
- Provide the Arts & Business Council with monthly narrative reports about your project’s activity
- File any grant reports or other funding documentation and requirements in advance of the funder’s deadlines
- Inform the Arts & Business Council promptly of changes in project or contact information
- Respond to Arts & Business Council requests in a timely manner
- Act as a good steward of the Arts & Business Council and Greater Nashville’s creative community
This infographic from the National Council of Nonprofits visualizes the fiscal sponsorship relationship well.
If your project is a sole proprietorship, single-member LLC, or unincorporated association, you will need to account for your project on your personal tax return(s). This means you will need to:
- Fill out a 1099-MISC form for any individual(s) you pay a total of $600 or more during the calendar year.
- Claim all income from the Arts & Business Council on your tax return and deduct project expenses by filling out a Schedule C.
If you are a corporation in Tennessee that has yet to file their application for 501(c)(3) or is waiting on the IRS is as a sole proprietor, then you may need to complete a 990, depending on your budget size. We strongly recommend consulting a tax professional for more information.
Our costs include an application fee ($50 for Arts & Business Council members, $100 for non-members) and a $25 onboarding fee should you be accepted into the program, and a monthly maintenance fee of 7.5% of any funds that are deposited with us. We also charge rush fees if we need to accommodate requests for materials on short notice. Please get in touch with us to discuss the fee structure in more detail.
Program benefits include:
- Access to our Volunteer Lawyers & Professionals for the Arts program for pro bono bylaw and articles of incorporation review, as well as other pro bono or low-cost legal services for arts-related disputes
- Your project’s money is held in a separate account and available to you as needed (given adequate notice and documentation)
- Weekly deposits and check processing
- Automated monthly account statements via email
- Letters of agreement for grant applications available as needed
- Donors who give $250.00 or more to your project (individual and corporation/foundation) are sent acknowledgements from the Arts & Business Council to document tax deductions
- Access to the Arts & Business Council’s other program and services, including Arts Board Matching, as well as discounts on certain Education seminars.
Currently, the Arts & Business Council’s Fiscal Sponsorship program is limited to a total of 25 projects. You can view our current roster of projects in order to gauge the capacity and competitiveness of a particular application cycle.
Once we have a signed contract and proof of insurance on file, we’ll set up your Arts & Business Council bank account and send you links to online forms and tools to help manage your project with us. Then, you can start fundraising!
We also often offer fundraising and grant writing workshops through our Education program if you’re interested in brushing up on your skills.
- Be aware of your deadlines – it makes things easier for everyone (and avoids rush fees).
- Many of our sponsored projects are interested in applying for the same grants, so our plate gets filled up fast for the popular ones. Since all projects are applying for tax-deductible donations using the same EIN, it will be first-come, first-served.
- Make sure your donors make checks out to the Arts & Business Council and not to your organization, and write your project’s name in the memo field.
- Keep track of your records. It’s always good to be prepared.
- Keep the Arts & Business Council aware of what’s going on. If you’re exploring new funding, making changes, or have new projects coming up, let us know. We’re here to help you.
Quick check: Is your project eligible?
- The project must be located in Tennessee, and have its main activities happening in the state, though additional programming can occur elsewhere.
- The project’s activities must be for 501(c)3 charitable purposes.
- The project’s mission and purposes must be aligned with the Arts & Business Council’s mission and purposes.
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