As you get started organizing and especially if you start dealing with money, people may ask about nonprofits, 501c3s, and encourage you to become some sort of finalized organization. This article will outline the different types of organizations or groups that people organize through: non-profits, fiscally sponsored projects, and alternatives to nonprofits.
Nonprofit organizations, also known as a 501c3 or NGOs, are organizations that have received a tax exemption from the IRS. These organizations have received a tax- exempt status, and, theoretically, these are organizations not making a profit from their work (such as a business would). These organizations are registered with the state and are legal organizations that must have certain documents and a legal Board of Directors to be in operation. Nonprofit organizations cannot engage in electoral politics or influence an election result, meaning they cannot campaign for a certain politician.
Why do people join or create nonprofits? Nonprofits, because of their relationship to the government, have greater access to resources. They can more easily open bank accounts, pay people, receive donations, receive benefits and discounts, and handle large amounts of money. In order to apply for grants, often you will need to be a nonprofit or connected to a nonprofit.
As you might be able to guess, the process to becoming a nonprofit requires more work, organization, and paperwork. You will need to have a Board of Directors, legal bylaws, and go through other administrative processes in order to become verified.
Nonprofits, because they are directly adjacent to the state, are more likely to become subjected to state surveillance. In the climate justice movement, we must come to the realization that the state is in direct opposition to climate justice. The government, or the state, has been actively squashing social movements since its inception. From Black liberation movements of the 1960s to the American Indian Movement to present day social movements, we see the state playing an active role in surveillance and targeting social movements.
So in becoming a nonprofit, you are more likely to be surveilled and even partnered to the state. Additionally, when nonprofits grow, they must grow their budgets as well. This means looking for larger sources of money from foundations and grantmaking institutions. Accepting money from foundations is often a slippery slope. Remember, our accountability and responsibility is to our people, the movement, our communities, and to ourselves, not to our foundations or wealthy donors.
A fiscal sponsorship is a formal legal relationship between a nonprofit and a group that is not a nonprofit organization. You sign a contract with a nonprofit to use some of the benefits of the organization (such as the tax-exempt status, as well as applying for grants), in exchange for a fee. Uplift is a fiscally sponsored project of Social and Environmental Entrepreneurs, they do not engage in our programming or work, but we use their status to apply for grants and receive donations. In exchange, they take a small percentage to support their operations. Fiscal sponsorship may be the easiest way to receive grants and handle money. If you are running a small group, say a mutual aid project, that has blossomed in size and donations, you may need to find a nonprofit to fiscally sponsor you.
To find a fiscal sponsor, you may be able to ask a trusted nonprofit organization in your community. Any nonprofit with a 501c3 status can be a fiscal sponsor. Certain organizations also run fiscal sponsor programs, such as Social and Environmental Entrepreneurs and the Power Shift Network. Some nonprofits will require more official paperwork, such as an annual budget, full time staff, while other nonprofits are comfortable with less official paperwork. It’s important to find a fiscal sponsor that meets your needs and that you trust to not co-opt or control your work. If you are fiscally sponsored, your organization or group is a project of that nonprofit, and it is very common for nonprofits to detail or limit the radical work of their fiscal sponsorees.
There are a few alternatives to organizing beyond a nonprofit. One of these is fiscal sponsorship, discussed above. This allows you to access most of the benefits of a nonprofit without officially being a nonprofit. You can use fiscal sponsorship to different levels, only using your fiscal sponsor for part of the time or for when you need to apply for a grant. We recommend when becoming connected with a fiscal sponsor, there are clear guidelines and understanding of your relationship with the nonprofit/ fiscal sponsor.
If your project or group is small enough, you may not need any type of nonprofit status. You may be able to handle money through personal Venmos, bank accounts, PayPals, etc. If this is the case, it is recommended that you become clear on tax guidelines so you don’t get a surprise call from the IRS or someone in your community.
Ultimately, it is your call as a young person to have the organizing spaces and avenues that feel best for you. We encourage you to do more research into these spaces and find the types of support that re- affirm you the most in your autonomy and agency. If you are worried about the ways your small project is handling money in regards to tax laws, we encourage you to check out Dean Spades articles and videos on mutual aid money management.