Differences Between Starting a
Nonprofit and Using a Fiscal Sponsor

When considering whether to begin an independent nonprofit (also known as a 501(c)(3)) or using an existing charity (such as United Charitable) to sponsor your program, there are a number of issues to think about.

Here is a chart that compares starting a new independent charity, and choosing fiscal sponsorship at United Charitable. If you have any questions, please feel free to call us at (571) 620-3000 and we'll be happy to discuss your proposed program details.

 

New Independent 501(c)(3)

Fiscal Sponsorship at United Charitable

The best option for

New Independent 501(c)(3)

Charitable project with funding already in place; program has proven track record, with administrative and financial staff in place.

Fiscal Sponsorship at United Charitable

New, emerging, or grassroots projects wanting administrative and financial management; projects looking for grant funding to begin; project waiting for IRS determination.
How do I start

New Independent 501(c)(3)

Incorporate in a state. Complete IRS Forms 1023 and SS-4, state registration forms, and attachments.

Fiscal Sponsorship at United Charitable

Complete United Charitable's Fiscal Sponsorship Application—include project proposal, budget, and advisors.
Governing documents

New Independent 501(c)(3)

Articles of Incorporation & Bylaws.

Fiscal Sponsorship at United Charitable

Fiscal Sponsorship Agreement.
Who oversees and governs?

New Independent 501(c)(3)

Board of Directors. The nonprofit is independent.

Fiscal Sponsorship at United Charitable

Advisory Committee, operating under United Charitable's Board of Directors.
How long do I have to wait before I can receive a tax deduction?

New Independent 501(c)(3)

3 to 6 months or more to receive IRS determination letter, after Form 1023 submitted.

Fiscal Sponsorship at United Charitable

No wait; once United Charitable accepts your program, contributions are tax-deductible.
How long do I have to wait before I can receive a tax deduction?

New Independent 501(c)(3)

3 to 6 months or more to receive IRS determination letter, after Form 1023 submitted.

Fiscal Sponsorship at United Charitable

No wait; once United Charitable accepts your program, contributions are tax-deductible.
Who is in control?

New Independent 501(c)(3)

The nonprofit is independent and autonomous.

Fiscal Sponsorship at United Charitable

United Charitable has ultimate legal control and oversight, but much operational authority is delegated to your program's Advisory and Program Manager.
What are the fees I need to pay to start?

New Independent 501(c)(3)

Up to $10,000 or more in attorney fees, IRS filing fee of $750.

Fiscal Sponsorship at United Charitable

Application fee is $1,000 and 8% of each incoming donation. We also require our programs to enroll in Insurance Coverage for their program. Currently, it is $500 annually, but may fluctuate year-to-year.
Are there restrictions on registering for state fundraising and solicitation?

New Independent 501(c)(3)

For nonprofits seeking to file charitable registration forms in all the states where registration is required, the cost of filing fees plus labor for preparation of the forms can be between $5,000 and $10,000.

Fiscal Sponsorship at United Charitable

United Charitable is registered in all states that require registration.
What annual forms so I need to file?

New Independent 501(c)(3)

IRS Form 990, financial audit, state forms, payroll forms.

Fiscal Sponsorship at United Charitable

Annual program activity report to United Charitable. United Charitable files Form 990, and conducts annual financial audit.
Charitable purpose required, no excessive private benefit

New Independent 501(c)(3)

Yes.

Fiscal Sponsorship at United Charitable

Yes. Program Managers or their family members cannot donate to the Program.
Must pass the public support test (1/3 of support comes from the public) to avoid private foundation status

New Independent 501(c)(3)

Yes.

Fiscal Sponsorship at United Charitable

No, United Charitable ensures that each program passes the public support test.
Donations and grants are payable to

New Independent 501(c)(3)

The nonprofit.

Fiscal Sponsorship at United Charitable

United Charitable, in support of your program's charitable mission.
Who raises the money?

New Independent 501(c)(3)

The nonprofit, in its own name.

Fiscal Sponsorship at United Charitable

Your project, with your acceptance letter and IRS status of United Charitable.
Who owns the assets?

New Independent 501(c)(3)

The nonprofit.

Fiscal Sponsorship at United Charitable

United Charitable, in an internally segregated account dedicated to your project.
Who pays the bills?

New Independent 501(c)(3)

The nonprofit.

Fiscal Sponsorship at United Charitable

United Charitable, from the funds in your project account, at the Program Manager's recommendation.
Who hires staff and does payroll and benefits?

New Independent 501(c)(3)

The nonprofit.

Fiscal Sponsorship at United Charitable

United Charitable.
Who is liable for project debts and claims?

New Independent 501(c)(3)

The nonprofit.

Fiscal Sponsorship at United Charitable

United Charitable.
Insurance is provided by

New Independent 501(c)(3)

The nonprofit.

Fiscal Sponsorship at United Charitable

United Charitable, paid annually out of the program's account at United Charitable.
Administrative and technical support

New Independent 501(c)(3)

You are on your own.

Fiscal Sponsorship at United Charitable

In addition to financial administration, United Charitable provides HR, organization development advice, funding resources, and educational guidance. Program Managers can login to see account balance and transactions.
What happens if my project fails?

New Independent 501(c)(3)

Must dissolve corporation, do government filings, etc.

Fiscal Sponsorship at United Charitable

United Charitable closes project account and charges a 2% fee of assets ($75 minimum).
What happens if my project succeeds?

New Independent 501(c)(3)

Corporation grows.

Fiscal Sponsorship at United Charitable

Project may transfer assets and liabilities to its own, new, separate nonprofit corporation.