When to Choose Fiscal Sponsorship Over 501(c)3 Incorporation

If you have a short-term or one-time project, or are just starting out as a creator, incorporating as a 501(c)(3) is not the most practical or cost-effective way to incorporate. Instead, fiscal sponsorship can be a good option for organizations or individuals who are not yet ready or able to incorporate as a 501(c)(3) nonprofit organization. Being a fiscal sponsoree allows you to accept tax-deductible donations and apply to larger grants for your project without having to go through the process of setting up a separate nonprofit organization, which is costly and time-consuming. If you are unsure if your project or organization will be successful, fiscal sponsorship can provide a way to test the waters without committing to the time and expense of incorporating. If your project or organization is successful and continues over the long term, it may be necessary to incorporate it to ensure sustainability and stability. We generally suggest considering incorporating as a 501(c)3 once you reach $250k annual revenue and/or being in business for at least 5 years.

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