The New Project Director's Guide to Fiscal Sponsorship: How to Pick the Right Sponsor and Build a Strong Partnership

This Is a Partnership, Not a Service You Are Buying

Here is the most important thing to know: your fiscal sponsor is legally responsible for your project. The IRS sees your work as part of their organization. That is a big deal.

This is not like hiring an accountant or renting office space. Your sponsor has to make sure every dollar is spent the right way. They have to follow the rules, and so do you.

Before you start looking for a sponsor, ask yourself:

• Am I ready to follow someone else's policies and procedures?
• Can I accept limits on how I spend, hire, and fundraise?

If the answer is no, you might not be ready for fiscal sponsorship yet. And that is okay. It is better to know now.

How to Find Potential Fiscal Sponsors

Once you know what fiscal sponsorship involves, the next step is finding organizations to talk to. Most projects start with a short list and narrow it down from there. A few practical places to look:

• National Networks of Fiscal Sponsors (NNFS). NNFS maintains a list of organizations that offer fiscal sponsorship and follow shared best practices.
• Targeted searches by region or field. Searching “fiscal sponsor + your state” or “fiscal sponsor + subject area” (for example, arts, filmmaking, or medical research) often surfaces organizations that already understand your work.
• Referrals from your network. Funders, nonprofit advisors, and other project directors can often point you toward sponsors worth talking to, and away from ones that may not be a good fit.

Once you have a few options, the next step is understanding what kind of sponsorship each one offers.

Know What Type of Sponsorship You Are Getting

There are different types of fiscal sponsorship. The two most common are:

• Model A (Direct Project): Your project is legally part of the sponsor. They employ your staff, sign your contracts, and hold your funds.
• Model C (Pre-Approved Grant): You stay a separate organization. The sponsor gives you grants from donations they receive on your behalf.

Many problems happen because project directors did not fully understand which model they chose. These models work very differently day to day.

Ask your potential sponsor:

• Who employs my staff?
• Who signs contracts?
• Who owns the bank account?
• Who is on the hook if something goes wrong?

If a sponsor cannot explain this clearly, keep looking.

Understand the Fees and What Happens in a Slow Year

Fiscal sponsors charge fees to cover their costs. This is normal and necessary. Running a fiscal sponsorship takes real work: accounting, compliance, HR, legal review, and more.

Many new project directors underestimate how much it costs to support them well. That can lead to frustration later.

Ask upfront:

• What is the fee, and what does it cover?
• Is there a minimum fee or revenue requirement?
• What if I have a slow fundraising year?
• Are there extra charges for payroll, HR, or legal help?

A good sponsor will answer these questions openly. They will not pretend they can absorb unlimited costs for you.

Pay Attention to How They Communicate

Communication is the biggest factor in whether a sponsorship works well. More than reputation. More than fees.

When you talk to potential sponsors, notice:

• Do they explain things in a way you can understand?
• Do they tell you about risks, not just benefits?
• Do they ask you hard questions about your plans?

You are picking a working relationship, not just an organization. Choose people you can talk to.

Finding the right sponsor is step one. Step two is showing up as a strong partner. Here is how.

Learn How Your Sponsor Works

Your sponsor has to follow IRS rules, pass audits, manage restricted funds, and handle employment laws. They are often doing this for dozens of projects at once.

When sponsors say no to something, it is usually because they have to. They are protecting you, themselves, and all their other projects.

Strong project directors:

• Learn the basics of nonprofit compliance
• Respect that some things take time to process
• Ask questions instead of pushing back

This builds trust fast. It also makes your sponsor more willing to be flexible when you really need it.

Tell Your Sponsor About Problems Early

One of the biggest frustrations sponsors have is finding out about problems after they have gotten big. By then, options are limited.

Make it a habit to:

• Share cash flow concerns as soon as you see them coming
• Be honest about fundraising challenges
• Check in before making promises to funders, vendors, or staff

Sponsors can often help, but only if they know what is happening. Early communication gives everyone more room to solve problems.

Think of This as a Learning Period

Many projects eventually become independent nonprofits. That is a normal and healthy outcome. Sponsors expect it and support it.

While you are sponsored, ask yourself:

• What skills am I building?
• What would I need to run my own nonprofit someday?
• How can I use this time to learn good financial and governance habits?

Sponsors respect projects that think ahead. You do not have to stay forever, but use the time well.

Your Success Is Tied to Your Sponsor's Health

Here is something that is easy to miss: if your sponsor struggles financially, all their projects feel it. If a sponsor fails, every project under them is affected.

That means:

• Paying fair fees helps keep the sponsor healthy
• Respecting their limits helps them serve everyone better
• A sustainable relationship protects your work too

The best partnerships are built on honesty about what each side needs.