FAQ
Readiness & eligibility
What funders check on a small nonprofit — and the one mistake that disqualifies more tiny orgs than anything else.
- What's the number-one thing that gets a small nonprofit disqualified?
- Losing your tax-exempt status by not filing. If you fail to file any 990-series return — for a tiny org that's usually the Form 990-N e-Postcard — for three years in a row, the IRS automatically revokes your exempt status. A revoked org fails every funder's IRS check (Walmart's Deed verification, DAF sponsors, community foundations). File the 990-N every year; it's free and takes minutes.
- What do funders actually check before they give?
- Three things, mostly: that your IRS exempt status is current (they look you up on IRS Tax-Exempt Organization Search), that you have a findable footprint (a claimed Candid profile is often the only place a tiny org's numbers are visible, since 990-N filers don't appear in databases like ProPublica), and that your project benefits the community at large rather than only your members.
- How many board members do we need?
- Expect every funder to want to see at least three board members, most of them unrelated to each other and to staff. Some states legally allow fewer — but funders and the IRS's practical expectations don't care about the minimum; three-plus, mostly unrelated, is the working standard.
- Should we get 501(c)(3) status or use a fiscal sponsor?
- If you're testing a program or want to avoid governance overhead, a fiscal sponsor extends an existing 501(c)(3)'s status to your project for a fee (one verified example charges 8%; the range is commonly mid-single-digits to about 10%). If you're committing for the long haul, filing your own Form 1023-EZ ($275 user fee) may be simpler. Match the choice to your stage.
Most of what funders check, you can fix in an afternoon. The biggest risk isn’t losing a competition — it’s a lapsed filing quietly disqualifying you. Work through the grant-prep checklist to close the gaps.
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