[Updated 2025] Many people want to raise money for a charity, but they don’t know how to do it. If your business or brand wants to run sales to help a charity, you may have to answer questions about the law and how to report them.
If they don’t have clear directions, even good causes can get into trouble.
It’s important to know that more than 40 states have laws that say how businesses can use their goods or services to help charities. These rules, known as “charitable solicitation laws,” cover things like contracts for raising money, statements that must be in ads, and registration duties.
This post breaks down what commercial co-ventures must know before starting a cause-related marketing campaign. You will learn about written contracts, advertising needs, registration rules for businesses working with charities, and the risk of noncompliance.
Keep reading if you want to avoid headaches and raise money for your next project in a safer way.
Main Points
- Over 40 states in the U.S. have rules about cause-related marketing and commercial co-ventures. You must follow these rules to avoid getting in trouble with the law or being fined.
- Companies that work with charities and want to run sales need to sign a contract in writing first. The contract should detail everyone’s responsibilities, deadlines, how the money will be split, and how the charities’ names will be used in ads.
- About 12 states say that ads must be clear and tell buyers exactly how much of each sale goes to the charity, like “5% of sale” or “1 item per item.” If you don’t do this step, you could have big problems. For instance, Yoplait got in trouble in 1999 for not putting full donation limits on the lids of their products.
- Some states, such as Alabama, Maine, and Massachusetts, may require businesses to sign up and even get a bond before they can start their fundraising campaigns.
Charitable Solicitation Laws and Commercial Co-Venture Activities
Many states have clear rules about how tax-exempt groups and for-profit businesses can work together to make money. Cause marketing campaigns, like when a brand gives money from each sale to charity, have to follow state laws about asking for donations in order to stay legal.
Significance of Cause Marketing
Cause marketing is a big part of how businesses and charities work together in the US. Cause-related marketing is how for-profit brands and social enterprises run charitable sales promotions.
These campaigns say that buying certain things helps a nonprofit group, like giving money to local charities or national groups like United Way Worldwide. This gets people who want to donate money to good causes to come in.
Commercial co-ventures, which are usually for-profit businesses that work together, do very well when they connect sales to charitable causes. Cause marketing isn’t just about giving money; it also helps charities and makes customers trust you more at the same time.
Reports from 2022 said that these campaigns made billions of dollars by using simple messages at the point of sale, like cookie boxes or matching gift programmes. State rules and tax law made it clear what information needed to be shared.
Laws in 40 states governing charitable solicitations
There are a lot of rules about cause marketing, but it can help charities raise more money. Forty states in the US have rules about charitable activities and requests for donations, like sales promotions for charities.
These rules are very strict for both for-profit and nonprofit groups that want to take part in fundraising campaigns or business partnerships.
Each state has its own rules about who needs to register, send in a solicitation notice, or file a joint financial report. Some people think that professional fundraisers should get a bond before they start working for a charity.
“Charitable corporation,” “commercial co-venture,” and even “solicitation” all have different meanings in different states. This makes it hard for groups that work in more than one state to follow the law.
If charities want to run campaigns online or across the country, they need to be very careful about the rules for registering.
You can now reach donors in many states at once more easily than ever through social media and the internet. That’s why it’s even more important to stick to these rules. If you don’t follow the rules on IRS Form 990, you could lose your tax-exempt status or have to pay a fine.
Contracts for raising money need to be clear. In 40 different jurisdictions, making false statements could hurt your campaign’s chances of success in any regulated area.
Key Terms Regulated by Charitable Solicitation Laws
The laws about asking for donations use a lot of special words, like “commercial co-venturer” and “fundraising contracts.” These words help set the rules for how a for-profit business and a nonprofit organisation can work together to raise money for good causes.
Commercial Co-venturers
A commercial co-venturer is a business that makes money by working with a charity. This company has a charitable sales campaign, which means that buying its goods or services helps a good cause.
About 21 states have special rules for these partnerships because of their laws about asking for donations. A commercial co-venturer is anyone or any business in Massachusetts that sells things that help charities.
Most co-venturers want to do more than just get money; they want to sell things too. At the point of sale, they often use cause-related marketing to help groups that don’t have to pay taxes (501(c)(3)) or groups that do.
Companies have to follow state laws and may have to file reports like IRS Form 990. These things help the charity and the business get more money and trust.
Fundraising counsel
Fundraising advice helps charities find ways to get money. This group doesn’t ask for donations or collect money for the charity directly. Paid solicitors, commercial co-venturers, and fundraising counsellors are all treated differently by state laws.
Some states require written agreements or contracts for fundraising between the nonprofit corporation and the fundraising counsel, but what these terms mean varies from state to state.
Forty states have laws that cover things like this, so it’s important to follow the law. Fundraising advisers must follow all of the rules about reporting that the board of directors or charities bureau in each state has set.
To be open, reports like IRS Form 990 often name these companies. One good practice says
Clear roles help people know the difference between a business partner and a fundraising counsellor.
Under charitable solicitation laws, trustees must also keep track of who is in charge of advertising, giving financial advice, and filing paperwork.
Professional fundraisers/paid solicitors
Professional fundraisers, also known as paid solicitors, help charities by asking for money or running sales to get donations. They have to follow strict state laws that are different from the ones that apply to businesses that work together.
In 40 states, these fundraisers have to follow rules about how to ask for donations, and they usually have to register with the state before they can start any campaigns. Their information is made public in a lot of places to be clear and honest.
For these fundraising contracts, you may need to do more than just send in IRS Form 990 or a financial report about the money you raised. Some states also require them to post a bond, which is like insurance in case something goes wrong.
State officials keep an eye on these things because the rules protect donors and nonprofits from fraud and false promises about gifts that can be written off on taxes. Businesses that work with nonprofits on commercial co-venture campaigns will need to pay close attention to contract requirements from now on.
Solicitations and contributions
In solicitations, people or businesses are asked for money to buy things or to help a good cause. State laws keep a close eye on these, especially when it comes to cause marketing and commercial co-ventures, like selling cookies to raise money for a charity.
Over 40 states have rules about how charities and businesses that work together should handle requests for donations during sales.
People give money or things as part of these campaigns, which are called “contributions.” State laws say that all donations made through events, product sales, or online promotions must be recorded.
Charitable organisations must file IRS Form 990 to report donations and follow the rules for reporting in each state. This makes it clear to both donors and the government how to raise money.
Legal Requirements for Commercial Co-Venturers
State rules for charitable sales promotions must be followed by commercial co-ventures. Learn what these rules are and make sure your business follows them.
The charity and the business partner should have a written agreement.
State laws say that when a for-profit business works with a charity on a business project, they have to have a written contract. This rule applies to all 40 states that have laws about marketing activities and charitable sales.
The contract spells out what each person has to do and how the money raised will help the charity. If a chain of stores has a charity event where a part of the sales goes to charity, for example, the agreement must be clear on paper.
A lot of state laws say that this contract for raising money has to be filed with the government before any requests for money or ads can be made. These legal documents help keep things clear and stop fights between the nonprofit and the for-profit partner.
Written agreements make it clear from the start what donors can expect, so they know exactly how their money will help the cause they chose.
Specific provisions required in the contract
A commercial co-venture contract must obey the laws of the state about asking for donations. Each agreement needs to be clear so that both the for-profit business and the nonprofit group obey the law.
- The contract must describe the goods or services offered in the charitable sales promotion using simple, direct language.
- It should list the geographic area where the cause-related marketing campaign will take place, such as Florida, Texas, or California.
- Both parties need to include exact start and end dates for when the charitable sales promotions will run.
- The agreement has to explain how the charity’s name and logo will be used in all advertising, like on Facebook posts or Twitter ads.
- Every contract must require a final accounting from the commercial co-venturer at the end of each campaign to detail proceeds raised.
- Details on how and when the nonprofit organization receives its share of funds are needed; this helps with legal compliance and IRS Form 990 reporting requirements.
- Disclosure requirements mean that all materials promoting the event must clearly show what portion of sales go to support charitable causes.
- The written contract needs provisions about keeping records accessible for possible inspections by state regulators or charitable trusts investigators.
When businesses, charities, and donors work together on philanthropic cause marketing, each point helps keep everyone safe.
Registration and bonding requirements in certain states
When it comes to laws about asking for donations, some states have extra rules for commercial co-ventures. A for-profit business in Alabama, Maine, or Massachusetts must first register before they can start a charitable sales promotion.
Most of the time, these state rules say that the business has to fill out a simple form or pay a fee.
In some places, the law says you have to bond. For example, you might need a bond in Maine and Massachusetts before you can ask for donations for cause-related marketing. This protects donors and charities in case the business doesn’t send the money it promised.
Before you sign any contracts for fundraising or charitable sales that involve nonprofit groups or commercial co-venturers, make sure you know the rules in your area.
Disclosure Requirements for Commercial Co-Venturers
State laws say that businesses that make money must be clear about sales that are linked to charitable causes. If you don’t follow these steps, the nonprofit group and the business partner could get into a lot of trouble with the law.
Details on expected portion of sales or proceeds to be disclosed in advertising
In about 12 states, laws about commercial co-ventures say that the amount of the donation for each product must be clearly stated. The ad needs to say how much goes to the charity with each sale, like “5% of the purchase price” or “1.00 per box sold.” This lets buyers know how much goes to the charity.
A statement that only gives a total isn’t enough.
These rules about what information for-profit and nonprofit groups must give out during charitable sales promotions apply to both types of groups. This information should be easy to find in each ad, like on tags or in online listings.
These rules make people more likely to trust cause-related marketing campaigns and do what the law says in their state.
Consequences of noncompliance with regulations
If you don’t follow the rules for asking for donations, you could get in a lot of trouble. Businesses that make money and charities could both get big fines and have to go to court. State agencies could take away their right to raise money or even stop the sale of some products that are linked to cause-related marketing.
If rules aren’t followed, donors’ trust can go down quickly.
Take a look at the Yoplait case from 1999. The company ran a sales promotion for a good cause, but the lids on the products didn’t make it clear that they would only give $100,000 to charity. People sent back 9.4 million lids, each of which promised to give fifty cents to a good cause.
People were angry about the mistake, and it showed why it’s important to have clear rules about what to tell people when you work with a nonprofit as a business partner.
Conclusion
Laws that say you can’t ask for donations help keep charitable sales promotions clear and fair. Co-ventures in business must follow state laws, use written contracts, and give buyers important information.
When charities and businesses do simple things like post honest ads and file on time, it’s easier for them to follow the law. Are you sure that the next time you market for a good cause, you follow these rules? If you miss a few, it could mean big trouble or losing the public’s trust.
These steps help charities reach their goals, help businesses grow their brands in a safe way, and keep everyone safe. Expert nonprofit lawyers can help you with IRS Form 990 or registering as a charity if you need more help or want to know for sure what to do.
It should be simple to do good. Every nonprofit and business partner can make a real difference if they have the right information.
Questions and Answers
1. What does it mean to have a business partner in charitable sales?
A commercial co-venture is when a for-profit business and a nonprofit group work together on a marketing campaign that is related to a cause. The business says it will help a good cause, usually by donating a part of its sales.
2. Do these campaigns have to let people know what they’re doing?
Yes, state laws require you to be clear when asking for donations or selling something for a charity. People need to know how much money will go to the charity and which nonprofits will get it.
3. Do you need a written agreement to do cause marketing with nonprofits?
Yes, the law says that the for-profit business and the nonprofit group must have contracts for raising money. This contract should say what each party is responsible for, what they need to report, and the details of the joint financial report.
Not always; there are some exceptions depending on the laws in your state and the kind of activity your corporate social responsibility efforts or articles of incorporation are about.
5. What kinds of reports do you need to write after running a campaign for a business partnership?
If a business works with or is a certain kind of charity, it might have to file an IRS Form 990. They also need to give each other financial reports that show how much money they made from each charity request.
6. Why do states care about fiduciary relationships in these kinds of deals?
Setting rules for fiduciary relationships between companies and charities is one way that laws about charitable solicitation protect donors and make sure that money goes where it was promised. This helps people keep their trust in all marketing that is related to a cause.
Related read: Arkansas Charitable Soliciation Law
Ellis Carter is a nonprofit lawyer with Caritas Law Group, P.C. licensed to practice in Washington and Arizona. Ellis advises nonprofit and socially responsible businesses on corporate, tax, and fundraising regulations nationwide. Ellis also advises donors with regard to major gifts. To schedule a consultation with Ellis, call 602-456-0071 or email us through our contact form.