People who are inspired to start a not-for-profit are usually hoping to change the world, or at least an aspect of it, for the better. You see a problem and you think you have a solution for that problem. The next step most people think of, after doing some research and testing to determine if your solution helps to alleviate the problem, is to start an organization so you can formally begin to address the problem. In many cases, a not-for-profit is the organization type that makes the most sense.
While you can be recognized in New York State as a not-for-profit by filing some basic incorporation papers, this recognition does not allow you to accept tax deductible donations. To receive tax deductible donations the organization must obtain 501(c)3 status from the federal government. This process can often be lengthy and more difficult.
If your organization is hoping to move more quickly, you should consider finding a fiscal sponsor. A fiscal sponsor is usually an organization that already has 501(c)3 status. Once your organization hooks up with a fiscal sponsor, the new organization can borrow the sponsor’s tax exempt status. The fiscal sponsor typically charges for this arrangement (often taking between 6% and 10% off the top of any donation). For the arrangement to be legitimate, the sponsor must obtain complete control over the funds that come in to the new not-for-profit and the fiscal sponsor’s mission must be similar to the new organization’s mission. In addition to helping with funds, a fiscal sponsor can provide much needed resources, knowledge, and experience to a new not-for-profit. Starting a not-for-profit presents many unique challenges and knowing people who have succeeded before can only help your organization grow.