Beware crowdfunding for nonprofit organizations.

Let’s say you want to raise some money for your community garden group. You’ve accessed some local grants, but you’d like to expand your fundraising reach. You might think that starting an online campaign through crowdfunding platforms like Kickstarter, IOBY, and Indiegogo or even putting a “donate” link on your website might be a good place to start.

Be careful!

Each state in the US regulates the solicitation within that state of donations for nonprofit organizations. In Maryland, any organization that solicits donations within the state is required to either register with the Secretary of State’s office (if the organization raises more than $25,000 per year) or to submit an “Exempt Organization Fund-raising Notice” (if the organization raises less than $25,000 per year).

The problem with raising funds on the internet is that anyone from any of the 50 states can see your organization’s online solicitation. Therefore, if a nonprofit organization decides to ask for donations online, in order to be in full compliance with the law, it must register with each of the 39 states that require solicitation registration, plus the District of Columbia. Depending on the state, the organization may also be required to submit further financial information annually after it registers with each state.

If your organization is based in Maryland, please contact Community Law Center for more information on solicitation laws.

You may find this book helpful in figuring out how to effectively and legally raise funds for your organization: Nonprofit Fundraising Registration: The Fifty State Guide.

Posted on by Becky Witt

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