Fiscal Sponsorship Models: A Guide to Different Models of Fiscal Sponsorship

here are seven fiscal sponsorship models, with structural differences between them. The more commonly sought models are direct, independent, and pre-approved grant models.

Let’s look at these three models to help you understand which would most benefit your project.

Fiscal Sponsorship Models: Direct Fiscal Sponsorship, Comprehensive Fiscal Sponsorship, Model A

With direct fiscal sponsorship, also called comprehensive fiscal sponsorship, or Model A fiscal sponsorship, the project essentially becomes one of the fiscal sponsor’s programs. Personnel that support the project are or become staff of the sponsor, through the agreement.

The fiscal sponsor directly receives donations and grants for the project, and the receipt and use of these funds are reported on the sponsor’s tax filings. A fiscal sponsorship agreement is usually required, along with a sponsorship fee. The sponsor is responsible for government filings, compliance tasks, fund disbursement, and financial reporting. The sponsor maintains control over the funds and while this may seem a tradeoff for some, it protects both parties.

In Model A, the charitable project operates as an ‘in-house’ program whereas in Model B the project is performed outside the fiscal sponsor’s programs. Model A and B are similar in that the fiscal sponsor has fiduciary responsibility for the venture.

Fiscal Sponsorship Models: Independent Fiscal Partnership, Model B Fiscal Partnership

In an independent fiscal partnership, or a Model B fiscal partnership, the charitable project is independent, and not directly operated by the staff of the fiscal sponsor. Rather, the charitable sponsored project functions as more of an independent contractor, that operates under the sponsor while focusing on the mission. Donations to the project enjoy tax-deductible status and are received and disbursed by the sponsor. Under Model B fiscal sponsorship, the sponsee also has increased access to grants. 

Ribbon provides charitable projects the independence and autonomy that is enjoyed with an independent fiscal sponsorship model. Charitable projects can focus on their mission while our tools lighten the administrative and compliance burdens. Ribbon maintains fiduciary oversight protections, so your venture can function with ease of mind. 

Fiscal Sponsorship Models: Preapproved Grant Relationship Fiscal Sponsorship, Model C Fiscal Sponsorship

In the preapproved grant relationship model, the role of the fiscal sponsor is more limited than in other models. The project is separate from the fiscal sponsor’s portfolio, though it may be in line with their mission. The fiscal sponsor’s main role is to receive grant funds and disburse them to the project.

This grantor-grantee type agreement is more hands-off than in other models. Fund oversight is still necessary by the sponsor to keep both parties protected and within IRS compliance standards. 

Limited Liability Company Fiscal Sponsorship Model L Fiscal Sponsorship

In this model, a single-member LLC is the sponsee and is treated as part of the sponsor for tax purposes. The sponsee can receive tax-deductible contributions and grants in its own name.

Other less used forms of fiscal sponsorship

Group Exemption Fiscal Sponsorship Model D Fiscal Sponsorship: 

In this model, the sponsor serves as the head of a group exemption as allowed by the IRS. The sponsor is able to lend 501(c)(3) status to projects that are separate legal entities but are affiliated with the sponsor. The relationship is similar to that of a parent (sponsor) and a subsidiary (sponsee).

Supporting Organization Fiscal Sponsorship Model E Fiscal Sponsorship

This model operates under strict regulation and can be used by organizations that have tax-exempt status that want to support a sponsor’s charitable goals. The results and funds are owned by the sponsee. 

Technical Assistance Fiscal Sponsorship, Model F Fiscal Sponsorship

In this Technical Assistance model, the sponsee has its own 501(c)(3) status and all funds belong to the sponsored project, with financial management and administration provided by the sponsor’s employees.