Nonprofits

Should I Start a Nonprofit or Join a Fiscal Sponsorship?

If you’re passionate about launching a nonprofit, you’ve likely wondered: should I start my own 501(c)(3), or should I operate under a fiscal sponsor?

Kian Alavi

CEO

February 21, 2025

Starting a Nonprofit: Full Control, but a Heavy Lift
Joining a Fiscal Sponsorship: Fast Start, Shared Infrastructure
The Smartest Path: Start with a Fiscal Sponsor, Then Grow Into Your Own Nonprofit

Starting a Nonprofit: Full Control, but a Heavy Lift

Starting your own 501(c)(3) gives you full control over your organization, but it also means taking on a lot of administrative work before you can start making an impact. Running a nonprofit isn’t just about doing good—it’s about managing finances, legal compliance, payroll, and fundraising.

Pros of Starting Your Own Nonprofit

✅ Total Independence – You make all the decisions.
✅ Direct Grant Access – Some funders only support registered 501(c)(3)s.
✅ Long-Term Growth – If successful, your nonprofit can operate for years.

Cons of Starting Your Own Nonprofit

❌ Slow to Launch – IRS approval can take months.
❌ Major Administrative Burden – Taxes, payroll, insurance, and audits—it all falls on you.
❌ High Costs – Managing compliance and operations adds up fast.
❌ Fundraising Challenges – Many new nonprofits struggle to gain early funding.

Starting a nonprofit is like starting a business. Without strong systems in place, even the best ideas can get stuck.

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Joining a Fiscal Sponsorship: Fast Start, Shared Infrastructure

A fiscal sponsor is an established nonprofit that supports your mission, provides guidance, and handles the back-office work for you. Instead of forming your own 501(c)(3), you operate under theirs—giving you instant nonprofit status without the admin headache.

Pros of Fiscal Sponsorship

✅ Start Fundraising Right Away – No waiting for IRS approval.
✅ No Back-Office Hassle – HR, compliance, bookkeeping, and reporting are handled.
✅ Lower Costs – Shared infrastructure keeps overhead down (often under 20%)—lower and more reliable than anything you can set up on your own from scratch.
✅ More Time for Impact – Focus on fundraising and delivering your mission, not admin work.

Cons of Fiscal Sponsorship

❌ Less Control – You follow the sponsor’s policies and oversight. (For many, this is actually a pro, as it provides structure.)
❌ Revenue Sharing – The sponsor takes a percentage to cover operations. (Again, if under 20%, this is probably a number you couldn’t get to starting from scratch. In other words, you benefit from their scale.)
❌ May Need to Transition Later – If you grow too large, the fiscal sponsor may want you to graduate and form your own 501(c)(3). (Although many are set up to support larger projects.)

For most early-stage organizations, fiscal sponsorship is the fastest, easiest way to get started while proving your impact.

The Smartest Path: Start with a Fiscal Sponsor, Then Grow Into Your Own Nonprofit

Instead of picking one or the other, why not do both? Many of the strongest nonprofits today started under a fiscal sponsor before transitioning to their own EIN.

Here’s how it works:

1️⃣ Start with a Fiscal Sponsor

  • Get 501(c)(3) status immediately so you can start fundraising.
  • Lean on the sponsor’s back-office expertise instead of building your own from scratch.
  • Learn nonprofit management without the full burden of running an organization. Fiscal sponsors want you to succeed and will share knowledge with you, including the ins and outs of how to run a nonprofit.

2️⃣ Prove Your Model & Focus on Growth

  • Show donors and funders that your work is making a difference.
  • Keep costs down while you build financial reserves.
  • Grow your programs without getting bogged down in admin work.

3️⃣ Transition When It Makes Sense

  • Once your organization reaches a size where it can support its own back office, start the process of forming your own nonprofit.
  • Many fiscal sponsors allow seamless transitions when you're ready.
  • Keep your momentum and build on the foundation you've already created.

Bottom Line

Running a nonprofit takes more than passion—it takes smart financial and operational decisions. And it requires a lot of upfront money and time to start from scratch.

Starting with a fiscal sponsor lets you hit the ground running, raise money faster, and focus on impact. When your organization is big enough to sustain itself, transitioning to your own 501(c)(3) will be a natural next step.

If you’re thinking about launching a nonprofit, ask yourself: Do I want to spend the next year doing paperwork, learning compliance, and installing systems, or do I want to start making an impact today?

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