1. Who Should Receive Your First Donation?
Start with the grant or campaign you plan to launch. A nonprofit public benefit corporation may fit a project that needs its own board, contracts, and bank account. Fiscal sponsorship may fit a pilot project that can operate under an existing charity’s oversight.
If a grant is already on the table, check whether the funder will accept a fiscal sponsor as the grantee before committing to either structure.
Forming a Public Benefit Corporation
Founders file articles of incorporation with the California Secretary of State. The organization adopts bylaws and documents who has authority to act on its behalf.
If the corporation plans to seek federal recognition under Section 501(c)(3), an attorney can review the articles. The attorney can confirm they properly limit the corporation’s purposes. The attorney can also confirm the articles dedicate assets to exempt purposes upon dissolution.
Nonprofit legal services can include drafting initial resolutions. These resolutions can authorize someone to open a bank account. They can also allow someone to sign a grant agreement or approve spending.
2. Working with a Fiscal Sponsor
In a common fiscal sponsorship setup, an existing charity accepts donations for a project. The charity keeps control and discretion over those funds.
The agreement should identify who signs contracts, approves expenses, issues donor acknowledgments, and reports to funders. It should also explain how the sponsor will manage any remaining funds and donor limits if the project ends.
It should also cover what happens if the project becomes a separate organization.
Compare the proposed agreement with any draft grant award, especially if they name different recipients.
Ask how long the sponsor takes to approve expenses and release funds and what paperwork it expects. If a vendor needs faster payment, confirm who can approve the expense and how the project will cover it while the request is pending.
3. Which Filings Does a New Charity Need?
Filing articles establishes the corporation. The California Attorney General’s Registry handles charity registration. The Franchise Tax Board and the IRS handle separate state and federal tax exemptions. An attorney can review the organization’s structure, planned activities, and funding dates. They can identify which filings apply and when each is due.
Initial Charity Registration
A charity that must register has to file Form CT-1. It must file the form with the California Attorney General’s Registry of Charities and Fundraisers. It must file within 30 days after it first receives charitable assets. Cash, grants, and donated property can trigger the deadline.
If assets have already arrived, review the deposit or transfer record, delivery confirmation, and grant terms.
Use these to confirm who received them and when.
The Registry accepts initial filings while an IRS determination is pending. If a fiscal sponsor is involved, review any separate registration duties for the project entity.
Base this review on the entity’s own activities and assets.
4. Federal and State Tax Exemption
Choose the form based on the exemption you seek and whether you already have a federal determination letter.
| Filing | When it applies |
|---|---|
| IRS Form 1023 | Standard application for federal recognition under Section 501(c)(3). |
| IRS Form 1023-EZ | Shorter federal application for organizations that meet its eligibility requirements. |
| FTB Form 3500A | State exemption for eligible first-time applicants with a qualifying IRS determination letter. |
| FTB Form 3500 | State exemption application generally used when the organization has no federal exemption. |
IRS Form 1023
- When it appliesStandard application for federal recognition under Section 501(c)(3).
IRS Form 1023-EZ
- When it appliesShorter federal application for organizations that meet its eligibility requirements.
FTB Form 3500A
- When it appliesState exemption for eligible first-time applicants with a qualifying IRS determination letter.
FTB Form 3500
- When it appliesState exemption application generally used when the organization has no federal exemption.
An attorney can compare the application with the organization’s planned programs, funding sources, and budget.
If the organization expects most of its funding from one donor or family, review public charity and foundation structures when evaluating federal classification.
5. What Should You Check before Accepting the First Gift?
Before publishing a donation link or accepting a grant, run through three checks.
- Campaign page and payment instructions. Name the entity that will receive the gift.
- Donor acknowledgment. Make sure the template names the same recipient.
- Grant terms. Compare the award with the program budget and confirm that the recipient can meet spending and reporting conditions.
Donor Communications While an IRS Application Is Pending
While the application is pending, donors have no advance assurance that their gifts are deductible. A deduction generally depends on the IRS recognizing the organization as exempt for the period when the gift was made and on the contribution meeting the other federal deduction requirements.
State the application’s status accurately in campaign materials. If donors give directly to a fiscal sponsor, name that sponsor in the payment instructions and have it issue the acknowledgments.
Gift Restrictions and Grant Terms
A grant can limit spending to approved costs, set reporting dates, or require the recipient to return unused funds. An attorney can compare those terms with the program budget and identify which changes require the funder’s consent.
If a donor wants to fund a specific activity that the organization may later need to change, charitable giving review can clarify the proposed restriction before acceptance. Keep the signed terms with the records showing when the gift arrived and how the organization used it.
Check which dates the grant covers, especially if the project has already paid a deposit or ordered supplies. If the award is silent on those costs, ask the funder to confirm in writing whether the grant can cover them before including them in the program budget.
6. Discuss Legal Support before Launch
For a consultation, bring a short project description, any draft articles or bylaws, the proposed sponsorship agreement, and the earliest grant or campaign deadline. Include records of any assets already received.
A nonprofit lawyer can use those materials to define the work, from drafting formation documents to reviewing the first grant or preparing registration and exemption filings. Confirm whether the engagement covers agency follow-up and how it handles government filing fees.
06 Nov, 2026
