Forge Collective is an LLC (limited liability company) fiscally sponsored by Fractured Atlas. What does this mean? It means we can operate as a 501(c)(3) not-for-profit organization without having to incorporate or tax-file as such, by using the status of the sponsoring organization. Fractured Atlas administers my grants and donations, making sure my activities stay within the boundary of non-profit. This arrangement gives us the flexibility of an LLC while enabling us to receive tax-deductible contributions and grants from public and private foundations.
Technically, any non-profit can serve as a fiscal sponsor, but there are some organizations whose sole purpose is to provide this service. Fractured Atlas is exclusively for art projects (keep in mind, the term art allows a wide array of interpretation), but there are others who focus on different areas, and there are many more that offer the service in addition to their main charity activities.interpretation) but there are others who focus on other areas. And there are many more that offer the service in addition to their main charity activities.
Used effectively, fiscal sponsorship could function as a basic income for supporting meaningful work. However, it takes some research and trial and error to build a successful project. We are here to help.
The benefits of using fiscal sponsorship are numerous. You don’t need to go through the lengthy process of forming a nonprofit, which includes selecting board members and creating by-laws (although those things are recommended if your operation requires a large budget and complex structure), and starting an LLC can be done at a fraction of the cost of starting a 501(c)(3). Furthermore, you learn the sound practice of operating a non-profit, as most sponsors provide detailed information and administrative services including consultation. No organizations would want to risk their non-profit status because their sponsored projects violated the legal guidelines.
The process of applying for a fiscal sponsorship typically involves an application with the project proposal and setting up a bank account under the project. An individual can apply as a sole proprietor, but forming an LLC is recommended. Most services charge a percentage of the money raised through their program, usually between 7% and 10%. In addition, some services may charge memberships and other fees.
Once you’re approved, you normally set up an online portal through which you manage your account. All donors who seek tax deduction must donate to your project through your sponsor’s account. For example, our donors and granters make the donations payable to Fractured Atlas. The fund is parked in the sponsor’s account until you withdraw from it, thus giving you flexibility of timing. For a large donation of $1000 or more, Fractured Atlas produces a letter receipt to the donor. At the end of the year, FA creates a 1099-Misc for your LLC which you file as a regular taxable business income..
At Forge Collective, we are planning to form our own non-profit down the line, but our partnership with Fractured Atlas allows us to take time building our organization. However, many individuals seek this service for a one-off project. It can be used for a complex, million-dollar endeavor requiring large grants, or for a small neighborhood project that can be accomplished with donations from local businesses and banks.
We offer workshops and individual consultation for finding and working with a fiscal sponsor. Contact us if you’re interested.