How can for-profit business accept donations?

I'd like to accept donations from the public through our website. The issue is that we are a FOR-profit business, not a NON-profit organization. What are the regulations and laws pertaining to for-profit businesses accepting donations? I'm sending each donor a small gift as a thank you.


3 Responses

Profile Picture of Frank Natoli
Frank Natoli

Founding Partner & CEO at Natoli-Lapin, LLC

Hi Mark,

The "donations" will be considered income and you will not be able to offer a tax deduction to those donors. The other issue is whether certain states where you solicit donations will require a registration before doing so. This is a state by state analysis.

If you would like to discuss further over a free phone consult, feel free to contact me anytime that is convenient. I will not be notified if you respond through this format so I would advise emailing me directly if you care to respond.

Kind regards,
Frank
www.LanternLegal.com
866-871-8655
frank@lanternlegal.com

DISCLAIMER: this is not intended to be specific legal advice and should not be relied upon as such. No attorney-client relationship is formed on the basis of this posting.

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Profile Picture of Shannon McDonald
Shannon McDonald

Attorney at Offices of Shannon K. McDonald

You may want to look at a site like kickstarter.org, instead. This site is made for all types of profit and non-profit organizations to raise funds in a legal way, reporting the funds to the proper entities, and also giving donors small gifts in return. This site may also get your project more foot traffic than it may get on your site.

That being said, I don't think there's legal ramifications from accepting donations other than that it is a pure cash in flow from your business and therefore can result in high taxes. Consult with a tax attorney in New Jersey to find out how you should report those donations.

I am not licenssed in New Jersey, and this is only broad information, and not specific legal advice. Please take the time to thank me if you found this answer helpful.

Best of luck,

Shannon K. McDonald
www.mcdonalddefense.com

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Profile Picture of Michael Duffy
Michael Duffy

Founding Member at Duffy Law, LLC

There are no specific prohibitions or regulations about accepting monetary contributions, but you should be careful to advise any potential "donors" that you are not a registered non-profit and therefore their contribution is not tax deductible. You of course could not make any misrepresentations. It would simply be business income.

Also, be careful with your accounting. Donations aren't necessarily immediately final, as in a sale. If you received a large amount of donations you might want to hold a certain amount in reserve in case of an issue, in which case you might have to refund it.

Regards,

Michael J. Duffy, Esq.
Duffy Law, LLC

1-888-414-5773
www.mduffylaw.com

1500 Market Street
12th Floor, East Tower
Philadelphia, Pennsylvania 19102

52 Berlin Rd.
Suite 3000
Cherry Hill, NJ 08034

mduffy@mduffylaw.com

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