Nonprofit Alternative

One studio owner enjoys the funds and freedom of a fiscal sponsorship

by Michelle Jones Wurtz

As a movement artist and studio owner, I’ve always sought to instill in my students a strong appreciation of technique as well as clarity, passion, and a general love for dance as an art form. That is my studio’s mission, and since in my mind that mission takes precedence over profit, I believed that establishing my studio as a nonprofit was the best way to go.

When I purchased my dance studio business in 2001, the studio served as the main feeder school for a 501(c)(3) nonprofit dance company. After a few years, the company’s founder and artistic director retired, and I became the company’s new artistic director. To best fulfill this new role as artistic director of a nonprofit dance company while continuing to run my dance studio business, I went back to school and received a master’s in public administration with a concentration in nonprofit management. I learned about the pros and cons of nonprofits, and how establishing your studio as a nonprofit can both help it and hinder it. I also learned how to take those pros and make them best work to my studio’s advantage.


Nonprofit pros and cons

In any nonprofit, the board of directors is the final authority—not the studio’s founder, the studio’s executive or artistic director, or the person who serves as the general backbone of the business. If you consider many long-standing, nonprofit arts organizations, you will find a history of directors leaving under not-so-happy circumstances. In some cases, the board wanted to take the organization in a different direction than the director envisioned, or vice versa. This is normal—once in a while, people disagree—and it happens with boards of for-profit organizations as well.

We know that the process of creating art isn’t always black-and-white, and things can get tricky when gray areas arise and board members want to have a say.

Nonprofit dance studios are no different. Many studio directors—myself included—took on the daunting job of business owner because we wanted to have the final say about artistic and educational decisions. We know that the process of creating art isn’t always black-and-white, and things can get tricky when gray areas arise and board members want to have a say.

Of course, there are benefits available only to nonprofit studios, such as grant opportunities. Most donations are tax deductible for the donor, and often a nonprofit studio is exempt from paying taxes on necessary items.

Is there a way for your studio to get these benefits while allowing you to maintain most of the control? Yes! Studio businesses can become associated with a nonprofit group that serves as a sponsor. This relationship is called a fiscal conduit or fiscal sponsorship, and through such a relationship the dance studio is able to remain a for-profit business and still reap some of the benefits of nonprofit status.


How it works

In a fiscal conduit/sponsorship, the sponsor performs certain administrative functions, especially concerning charitable donations and grant funds designated for specific projects such as performances or exhibits. The sponsor has a fiduciary responsibility to make sure projects fulfill a studio’s particular mission. Once the fiscal sponsor endorses a project, the studio can apply for grants, accept donations, and use tax exemptions for that project. Grant funds are distributed to the sponsor, who in turn pays the studio.

Sponsors may take administrative fees from grant funds for their work, which they use to advertise and grow their own organization’s base. Studio projects not involved with the sponsor—for example, rehearsing for and attending competitions—fall under the sole discretion of the studio owner. This removes any unnecessary bureaucracy and allows the studio owner to implement the day-to-day functions essential to running a school.

The fiscal conduit normally receives complimentary tickets to any projects it has sponsored, and receives sponsorship credit in print materials and advertising.


A win-win

My school, Pottstown [PA] Dance Theatre, is a member of the HPL 501c3 Institute, which has an international consortium and is locally managed by CJ Rhoads, a Pilates student who found my studio through her Tai Chi instructors. The Institute’s mission is to provide opportunities for people and groups all over the world to make connections that will improve their own opportunities for health, prosperity, and leadership.

My studio pays a nominal annual membership fee. We submit financial reports, and must adhere to ethical guidelines. Besides dance schools, HPL 501c3 supports Tai Chi studios, Qigong studios, and various groups and individuals with interests related to HPL 501c3’s mission; these international members all work together.

For example, through HPL 501c3, my studio received grants from the Pennsylvania Council on the Arts, a state agency funded through tax dollars and the National Endowment for the Arts. The grants allowed me to choreograph and mount dance pieces on the theme of encouraging healthy race relations, to bring movement therapy workshops to a local assisted-living facility, and to present excerpts from The Nutcracker to at-risk and other students at their public schools. The arrangement has been a win-win for all of us.


Finding a fiscal sponsor

You can find numerous resources by googling “local fiscal sponsors.” The Fiscal Sponsor Directory provides a list of sponsors nationwide on its website. The National Network of Fiscal Sponsors, a professional group for organizations that provide fiscal sponsorship and individuals who work in the field, lists members on its site as well as basic information for organizations seeking sponsorship. Network for Good’s website also provides information for groups seeking sponsorship.

Make sure your studio’s mission and the projects you’d like to pursue jibe with the sponsor’s mission. (Be mindful of the wording in potential sponsors’ mission statements.)

Once your studio is accepted by one or more of the fiscal sponsors (in my case HPL 501c3), you will need to include the sponsors’ Federal EIN number when applying for funding and accepting donations. Make sure you keep a copy of the sponsor’s IRS letter on file, as most granting agencies will need to see that the sponsor actually has 501(c)(3) status; photocopies are normally fine. There is no need for your studio to apply for any additional paperwork from the IRS. Be mindful of any changes in your sponsor’s mission that could impact your work.


Your studio, your choice

If your studio is mission driven and you feel you can give up solo decision-making regarding such day-to-day decisions as adding/dropping classes or revamping curriculum, you may prefer to be a traditional nonprofit. With a traditional nonprofit, everything you do is eligible for funding from various agencies and foundations.

For my studio however, being part of a fiscal conduit was a better option. I often prefer projects that a board might consider risky, such as taking students on a performance trip to the 2012 London Olympics. My students have loved the work we have been able to do because of this compromise, and representatives of our fiscal sponsor have enjoyed seeing that organization’s mission at work in our studio.


Pottstown Dance Theatre director Michelle Jones Wurtz holds a BFA in dance from the University of the Arts and an MPA in nonprofit management from Strayer University. She is also director of Melange Contemporary Dance, assistant director of ContempraDance Theatre, and a professor of dance at Eastern University.