Avoid Liability when Raising Money for Your Nonprofit

The first significant donation I received for my nonprofit was a $3,000 check from a gentleman I did not know. He was moved by our story and the work we were doing for students. Social media makes it easier than ever to get the word out about what you are doing and reach people passionate enough about your cause to give. As wonderful as this is, keep in mind that there are pitfalls associated with accepting donations. Here are a few tips to avoid liability when raising money for your nonprofit.

Register to Fundraise

Raising money has always been a potential source of liability for nonprofit organizations. Generally speaking, if your 501c3 nonprofit wants to ask people or organizations in a particular state for donations, you will need to register in that state to “solicit” donations if they require solicitation or fundraising registration. You typically have to renew the Solicitation License or Fundraising Registration with each state for every year. If your nonprofit plans to raise money in more than one state, you should consider speaking with a nonprofit attorney about registering in those states to make sure that you comply with the law.

Have a Disclaimer

Another source of liability when starting a nonprofit involves receiving donations before receiving your tax-exempt status from the IRS. If you collect donations before having your tax-exempt status from the IRS, you may want to include a disclaimer so that donors know that your status is pending until approved by the IRS. This disclaimer is important because you don’t want your donors to feel like you’re untruthful with them. Letting them know that you’re still waiting for your tax-exempt status to be approved is not only honest, but it also puts them on notice that there is a chance they will not get the tax write-off if you are not approved.

Once the IRS approves your tax-exempt status, you can adapt the language on your website to let donors and prospective stakeholders know that they can get a tax write-off for donating to your charity.

Comply with the General Data Protection Regulation

In 2018, the European Union passed the “General Data Protection Regulation” (GDPR). The GDPR lets the European Union issue fines to companies and nonprofits that don’t follow specific policies related to using private citizens’ information. You will want to make sure that your website is GDPR compliant and has the appropriate notices. While you may not have a nonprofit in the European Union, it is still essential to comply with the GDPR. Complying with the GDPR protects you if you have international donations. 

Avoiding liability can be complex and challenging. That’s why you need the right team with the right expertise to help you on this journey. Our team has helped thousands of people start and grow nonprofits that impact the world. If you want the best for your nonprofit, look no further than Chisholm Law Firm. We have a 100% success rate for our clients. 

You can rest assured that your nonprofit is in the best hands and that we’ll get everything done right the first time. Call us today to schedule your free consultation.

It shouldn’t be this hard to be a superhero. 


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