We are a homeschool organization with 501(c)(3) tax exempt status and have been approached by a new member to start a football program. He is interested in starting a football league for our members. He discovered we are a 501c3 organization and our status could help him.
I am a little hesitant in sharing our status with a program that is yet to be established. However, we like the idea of our boys having the option to play football. He wants to start practices NEXT week and wants to use our checking account for depositing the funds paid by parents.
On top of all the other responsibilities of budgeting the events we provide, I’m at a loss as where to begin in this new endeavor or if we should? Would he need a board of directors? By-laws of his own? Would we umbrella this league? I don’t know where to start or how to advise him.
I’m not sure I can take on more responsibilities, especially one this large. Can you offer advice or point me in the right direction as how to proceed? I am thinking perhaps he should be independent for a year to “prove himself” before we allow him under our 501c3 status?Trisha
Wow, nothing like pressure to make a decision!
What the football coach is proposing is called a fiscal sponsorship, i.e. using your 501(c)(3) tax exempt status as an umbrella he can fit under. Usually the sub organization pays a fee 1%-10% of their revenue to the parent organization.
There are pros and cons to a fiscal sponsorship arrangement. It can be temporary, just a year or two until the football program is spun off to be independent.
I recommend a book called Fiscal Sponsorship: 6 Ways to Do It Right by Greg Colvin. https://fiscalsponsorship.com/ the book and the website will help a lot.
You definitely want the fiscal sponsorship agreement written up and signed by both parties so that everything is clear.
You could set up the football program as one of your activities. This increases the risk to your group (football is a risky venture because of potential injuries). Make sure your insurance allows a football program; it may not.
Or you can require his organization have a separate board, bylaws, insurance, etc. Ask to see the list of board members, minutes of meetings, bylaws and most importantly the insurance policy.
Don’t be pressured into making a decision just because he wants to start the program now. Poor planning on his part does not constitute an emergency (or quick decision) on your part.
Tricia asked her questions by email. I can do that for your homeschool program, but it is very time consuming to read and reply to emails. I charge a reduced rate of $50/hour to read and reply to emails. Or perhaps a phone call would be better. Contact me to arrange a private phone consultation.
Carol Topp, CPA
Follow up: Tricia’s homeschool organization postponed the sponsorship for a year and in the following year started a six-man football team and it was very successful. They even added cheerleaders!
Read additional questions and answers Tricia had about operating a large program under her homeschool group’s tax exempt umbrella.