There are many different situations where there is a cause that needs immediate support and attention but no charity or organization that is currently filling this need. In this situation, it may be possible to consider fiscal sponsorship from a nonprofit in Minnesota to address the need in a quick and effective way.
As the nonprofit with 501(c)(3) status and a tax exemption, it is possible to collect donations and to provide administrative oversight for the cause. Often the group that is actually responding to the need is in the process of becoming a recognized nonprofit and is going through the stages of forming a board and filing the necessary documentation.
This process, as you know, can take months to complete. By using your nonprofit as the fiscal sponsor, the charitable organization taking on the project can solicit donations that are then handled by your organization and under your administrative practices.
Since you are approved as a nonprofit, the administrative management and oversight provided will be in full compliance with your organization bylaws and the laws of the state of Minnesota. At the same time, the charitable group will be able to carry on with their work while staying in full compliance and taking advantage, legally, of your 501(c)(3) tax exemption status.
How it Benefits Your Nonprofit
It is legal and commonplace when there is fiscal sponsorship from a nonprofit for the charitable project or group to pay a specific amount for the administrative and oversight services. This is often a percentage of the funds that are managed through the relationship.
Keep in mind as the fiscal sponsor you are still responsible for the distribution of the donations as per your Articles of Incorporation and bylaws. Typically, in Minnesota, the sponsor organization and the charity or group will have a written agreement that outlines the responsibilities of the sponsor and the administrative tasks required.
