By NEO Law Group
Fiscal sponsorship describes a number of varying contractual relationships that have through custom and practice developed between “sponsors” and “projects,” allowing charitable projects to receive deductible contributions. Having a charitable project fiscally sponsored by a sound and reputable fiscal sponsor may be an attractive alternative to starting a nonprofit, especially when an idea is being tested or incubated. There are several ways to properly structure such relationships, and it is important to get it right from the start. There are also a number of traps that can leave a project’s leaders vulnerable to losing typical rights associated with fiscal sponsorship, including the right to transfer the project to another 501(c)(3) entity, and/or losing funds raised for the project’s mission.
Fiscal sponsorship can be an effective and efficient alternative to starting and operating a new nonprofit organization. But there are great variations in how fiscal sponsorship relationships are established and memorialized in a written agreement. One of the first areas of confusion is who enters into the agreement with...
In March 2022, NEO Law Group Principal Erin Bradrick presented on the topic of the legal obligations of fiscal sponsors to Fiscal Sponsor Conversations: The Weekly Forum for Fiscal Sponsors hosted on the Schulman Consulting website. The Fiscal Sponsor Directory published excerpts from Erin’s presentation in an excellent article...
This post on fiscal sponsorship exits follows our first post focused on the selection of a successor and absence of an agreement regarding termination of the relationship between the fiscal sponsor and a Model A project’s leadership. Here, we focus on reasons for the termination that create problems. Poor...
Fiscal sponsorship exits can be very complex and at times contentious. In this series of posts, we’ll identify issues that may provide some guidance in structuring the initial fiscal sponsorship agreement, terminating that agreement, and transferring a project’s assets and liabilities to a successor fiscal sponsor or other nonprofit....
Many well-intended individuals who want to work on addressing public, social, and environmental needs think about starting a charitable nonprofit. Founding and leading a nonprofit may be viewed as a badge of significance and honor. But before moving forward, founders of a charitable venture should first consider the alternatives....
Fiscal sponsors must respect laws related to protecting assets restricted to furthering the charitable purposes of specific projects . If funds intended for a particular internal (Model A) project are diverted and used for other purposes (e.g., the fiscal sponsor’s general operating expenses), there may be legal repercussions. This...
We’ve written extensively on fiscal sponsorship on this blog and for others, including The Nonprofit Quarterly and the American Bar Association. Over the past few years, we’ve seen a great increase in interest in fiscal sponsorship, but also a rise in misconceptions and disputes, sometimes resulting from fiscal sponsors...
In the past week, ConstitutionDAO raised over $45 million to bid for a first edition copy of the United States Constitution. Ultimately, they did not win the auction held by Sotheby’s on Thursday, but they put the power and influence of DAOs on the map with heavy national news...
Today, NEO Law Group’s Erin Bradrick presented to the California Lawyers Association’s Nonprofit Organizations Committee on some tricky issues involving fiscal sponsorship. The focus was on 501(c)(3) fiscal sponsors and projects. Some highlights below: Common Models Comprehensive (Model A) Pre-approved Grant Relationship (Model C) For a brief summary of...
Many fiscal sponsors enter into relationships to support multiple fiscally sponsored projects (“Projects” or “FSPs”). Typically, these fiscal sponsors have some screening mechanism before agreeing to enter into these relationships, but often, the screening is superficial, resulting in significant risk exposure and/or undesirable administrative burdens for the fiscal sponsor....