Guide to Fiscal Sponsorship and Affiliation

Form Your Own Organization

Closely related to applying for grants on your own — and one option available to the grantseeker along the affiliation continuum — is forming your own (typically nonprofit) organization. Such organizations may be loosely or formally structured depending upon the degree of affiliation required by potential funders. They range from affinity groups of individual grantseekers who band together to provide one another simple moral support to formal tax-exempt 501 (c) 3 organizations incorporated for the purpose of seeking grants for specific projects.

If your idea involves the solicitation of funds from the general public as well as from funders (e.g., a matching gift or similar situation whereby funders provide only part of the project money), if it involves a construction program, renovation, or the large-scale purchase or rental of equipment (e.g., the transformation of a vacant inner city lot into a park, playground, or community garden), if it requires complex long-term procedures calling for several staff people in addition to yourself (e.g., an archeological dig, a free mental health clinic, a dramatic performance), then you probably should consider forming your own organization.

Forming your own organization may take time (from three months to one year), money (from several hundred to several thousand dollars in legal, accounting, and/or registration fees), and may be unappealing to the individual grantseeker who shuns formalities and red tape. Obviously, not all ideas lend themselves to the establishment of nonprofit organizations. For those that do, nonetheless, this is another possibility for the grantseeker. It serves as an alternative to seeking institutional affiliation and sponsorship.

The concept of forming an organization is one of establishing a coalition to create funding opportunities where none may have previously existed. You become, in effect, your own sponsor. Stated simply, if funders require institutional affiliation, you'll give them an affiliation, in the form of your own nonprofit tax-exempt institution.

If the organization you form qualifies for a certificate of tax exemption from the Internal Revenue Service (IRS), it is worth its weight in gold in terms of grant dollars, because a certificate of exemption is required by many corporations and foundations prior to consideration of your proposal. For information on securing tax exemption, see IRS publication 557, Tax Exempt Status for your Organization http://www.irs.gov/pub/irs-pdf/p557.pdf  (Washington, D.C.: U.S. Government Printing Office).

A useful dictum to follow in forming your own organization is always to get competent professional advice. Secure free advice where available from those who have already done it and information from agencies like the Small Business Administration — an excellent resource on starting your own business and related topics. You may not have thought of your grant idea as a small business, but in fact this is a useful construct for you to consider. Getting paid professional help as required from lawyers, accountants, bankers, and others provides a kind of insurance and usually proves economical in the long run, because it helps prevent serious mistakes.

To become familiar with the nonprofit incorporation procedures of your own state, write or call your State Attorney General for formal requirements, application forms, and fees. Be aware in advance that the process will take time and will vary enormously in terms of complexity from state to state. 

Even though relatively few individual grant projects lend themselves to this type of formal incorporation, it is one option available to you, if you wish neither to work entirely on your own nor to seek an institutional sponsor.  It is particularly appropriate for longer-term projects rather than short-term efforts.

For more information on how to form your own nonprofit organization, visit our FAQ: "How do I establish a nonprofit organization?"