The world of philanthropy is evolving. While starting a nonprofit was once the primary way to make a charitable impact, today’s environment offers a range of options for those looking to contribute to the greater good. Establishing a new nonprofit is no longer the only path to creating meaningful change.

This shift reflects a growing understanding that starting and maintaining a nonprofit is a significant commitment. It requires not just passion, but also a solid operational structure, sustainable funding, and a deep knowledge of regulatory compliance. With the emergence of alternative models like social enterprises, donor-advised funds, and fiscal sponsorships, there are now multiple avenues to make a difference—often with greater efficiency and impact.

Before joining the ranks of nearly 2 million nonprofits in the United States, it’s worth considering these alternatives. They can provide a more streamlined and effective path to achieving your philanthropic goals.

What are the Alternatives to Starting a New Nonprofit?

Partnering with an Existing Organization

One of the most straightforward alternatives to starting a new nonprofit is partnering with an organization that is already working toward a similar cause. Many nonprofits welcome collaboration and can benefit from new ideas, energy, and resources.

Benefits:

  • Established Infrastructure: Partnering with an existing nonprofit provides access to an operational structure that is already in place, including a network of staff, volunteers, and donors who are committed to the cause.
  • Immediate Impact: Unlike starting a nonprofit from scratch, partnering allows for immediate impact through existing programs and processes.
  • Shared Resources: Leveraging the nonprofit’s existing resources, such as its tax-exempt status, fundraising capabilities, and regulatory compliance routines, makes it easier to launch and sustain initiatives.

Example in Action:

For example, an individual passionate about environmental conservation might partner with a well-known environmental organization rather than starting a new nonprofit. Depending on the project, they could serve on the Board, volunteer, start a scholarship, or lead an initiative to restore local wetlands. By leveraging the organization’s resources and expertise, this individual made an impact more quickly and efficiently than if they had started a new nonprofit independently.

Sponsoring a Charitable Project (Fiscal Sponsorship)

Fiscal sponsorship is another viable option for those who want to pursue a charitable project without establishing a new organization. In this arrangement, an existing nonprofit sponsors the project, providing administrative support and allowing it to operate under the nonprofit’s tax-exempt status.

Benefits:

  • Tax-Exempt Status: Working under an established nonprofit allows the project to offer donors tax deductions without the need for its own 501(c)(3) status.
  • Operational Support: The sponsor typically handles tasks like accounting, compliance, and reporting, freeing the project leader to focus on the mission. Donors contribute directly to the sponsor, who then allocates the funds to the project.
  • Flexibility: Fiscal sponsorship is ideal for projects with specific goals or limited duration, providing the freedom to execute a vision without the long-term commitment of running a nonprofit.

Example in Action:

Consider a community member who wanted to organize after-school tutoring programs for local children. They submitted a proposal to a local education-focused nonprofit, outlining the program’s goals and potential impact. Through a fiscal sponsorship agreement, the individual secured funding and launched the programs. The nonprofit provided the necessary tax-exempt status and administrative support, allowing the organizer to focus on delivering the tutoring sessions.

Creating a Donor Advised Fund (DAF)

A Donor Advised Fund (DAF) is a charitable investment account that allows individuals to support their favorite causes while receiving immediate tax benefits. DAFs are increasingly popular among those seeking long-term philanthropic impact without the complexities of running a nonprofit.

Benefits:

  • Tax Advantages: Contributions to a DAF are tax-deductible and can grow tax-free over time, maximizing the impact of charitable giving.
  • Flexibility in Giving: DAFs offer flexibility in recommending grants to a wide range of charitable organizations. Donors can be strategic in their giving, adjusting as new opportunities arise, and can choose to remain anonymous.
  • Ease of Management: Managed by a sponsoring organization, DAFs relieve donors of the administrative burdens associated with running a private foundation, allowing them to focus on their philanthropic goals. Donors retain rights to advise on the distribution and investment of their donations.

Example in Action:

A tech entrepreneur who wanted to support education initiatives established a DAF with a community foundation. Over several years, the fund grew significantly, enabling the entrepreneur to make large grants to various education programs, from scholarships to school renovations. The DAF provided the flexibility to adjust the focus of giving as new opportunities arose, all while enjoying the tax benefits.

Establishing a Social Enterprise

For those who want to combine business with social good, starting a social enterprise might be the best option. A social enterprise is a for-profit entity that exists primarily to advance a social or environmental mission.

Benefits:

  • Financial Sustainability: Unlike traditional nonprofits, social enterprises generate revenue through the sale of goods or services, making them less reliant on donations and grants.
  • Innovation and Flexibility: Social enterprises often have more freedom to innovate and adapt than traditional nonprofits, as they are not bound by the same regulatory constraints.
  • Direct Impact: By integrating social or environmental goals into their business model, social enterprises can create a direct and measurable impact on the issues they address.

Example in Action:

A group of entrepreneurs founded a social enterprise that produces eco-friendly clothing. The company donates a portion of its profits to environmental conservation efforts and employs sustainable practices in its production process. This model allowed them to build a successful business while making a positive impact on the environment.

Finding the Right Path

Choosing the right approach to philanthropy begins with a clear definition of goals. It’s important to consider whether the focus is on achieving long-term impact or addressing a specific short-term project and to identify the key community or cause. Evaluating available resources—time, money, and expertise—helps determine whether a hands-on or strategic oversight approach is more suitable.

Next, assess how each alternative aligns with these goals and resources. Consider which option offers the most sustainable and meaningful change, and weigh the regulatory and compliance demands of each choice. Deciding whether to manage these aspects independently or partner with an existing organization can be critical in the decision-making process.

Ultimately, prioritize the factors that matter most, such as maximizing impact or minimizing administrative burdens. Consulting with experts like philanthropic advisors, attorneys, or accountants can provide valuable insights and help refine the decision, ensuring the chosen path aligns with both vision and practical considerations.

Next Steps

Starting a nonprofit can be a rewarding endeavor, but it’s not the only way to make a difference. Exploring alternatives may enable individuals to achieve their philanthropic goals more efficiently and with fewer challenges. For guidance on compliance requirements or meeting your philanthropic goals, contact Jonny Rosch, CPA and Partner with PBMares’ Not-for-Profit practice.