Page 15 - Washington Nonprofit Handbook 2018 Edition

The traditions of community service and mutual support that characterize
the role of nonprofits in American life have been historically a vital—even an
essential—part of our communities. There are hundreds of thousands of
recognized nonprofit organizations at work across the country today. Each of them
had its start in the same way: a small dedicated group committed to bringing a new
organization into existence. Some started small and have remained small. They
meet some specific need in some continuing way. Others have grown to be such
familiar features of our communities that it is hard for us today to imagine the
moment when they were nothing more than a shared vision.

Whatever the future holds for the idea that brings you to read these pages,
the authors of this book wish you the best of luck and great success in your efforts
to benefit the community. If these pages smooth the way for you to meet those
goals, then the work of putting this book together will have been well worth it.

CHAPTER 3. Alternatives to Incorporating

Many groups who want to do good in the community may not have the
resources, time or capacity to create and run a new nonprofit corporation. There
are alternatives to creating a new nonprofit corporation which allow organizers to
focus on their work in the community while getting help from another nonprofit or
foundation with back-office support, legal compliance and other support services.
It is common for community groups to get support through fiscal sponsorship for
the first year(s) and then incorporate and obtain their own tax-exempt status later,
when they have enough community support and internal capacity to run the
organization.

a. Fiscal Sponsorship

There are several alternatives to creating a 501(c)(3) nonprofit corporation.
The two most common are both fiscal sponsorship options: 1) partner with a
nonprofit exempt under section 501(c)(3) and have the work you hope to do
become a project of that nonprofit, or 2) incorporate as a nonprofit and enter into a
fiscal sponsorship agreement, in which another tax-exempt organization becomes
your organization’s fiscal sponsor.

Both of these options allow a new project or entity to do good work in the
community, without having to manage and oversee governance, legal compliance
and back office work. These options allow for the new organization to benefit from
the fiscal sponsor’s 501(c)(3) status, allowing the organization to receive tax-

deductible donations and grants from private foundations, and have its revenues

WASHINGTON NONPROFIT HANDBOOK -4- 2018