legality of starting up a campaign for charity?

[errorinexcellence]

A friend and I are looking to launch a campaign to raise funds and awareness for a cause in the local community.

A percentage (big portion) of it will be going towards the charity and will be a registered event. The rest of the proceeds will be used to maintain the subject of the project that we feel will be able to generate the funds and the cost to maintain the subject is not exactly cheap, as well as the cost for materials and start up cost.

There MAY be a small margin for profit after running a series of event.
What are the legality of making profit, do I have to register the name as a business?

There will be a website created, this is for the toronto community

[jasaunders]

What are you talking about? What is "the subject?"
If you are raising money for charity, its not a business. In the U.S. the recipient would just want an acknowledgment from the 4013c for the donation. Not sure about regulations in Canada. If you are running it as a business, you would need to register it as a business. If it is a for-profit business, first of all that's very sketchy, second of all, it will be hard to construct. Your best bet would be to have a nonprofit and pay yourself salaries from the company.

[errorinexcellence]

I dont want to say what the subject is yet as we have a few solid ideas. But the idea of this is to contribute to a cause and be able to accomplish that, but in the end still make a small profit for the time we have taken to organize such event.

Lets say 50% - 60% of the proceeds is donated to a certain fundraiser and will be a registered event as well as recorded so people will know it has been actually donated. the remaining amount is used to maintain websites, the events, food and drinks, n such, leaving a small percentage 10% or less for profit.

would I register that as a business? The main target of it is to contribute for the blind community and raising awareness around the local community. But as of now, it may even turn into a really good business idea later on, but I am doing this for my own good and because I want to help the cause and if the idea works as well as it may seem, then it could very well turn out into a company later on, so what are the legality of this?

[rogercbryan]

I do this for a living... check out this link. It will give you all the resources you need to meet the requirements of the IRS. It sounds like you will be a for profit business with a fund raising agreement for what ever LICENSED non-profit you want to work with. You can't be both the non-profit and a for-profit business at the same time.

IRS Tax Laws

[errorinexcellence]

Is it very sketchy like jasaunders said?

If it is I might as well scratch the whole idea all together then because Im not too sure how the community feels but with what jassaunders said, it does make sense, it would feel sketchy if I wasent fully aware of whats going on.

It will be registered with the non-profit organization and its a local community so there will be many local events held where people who have contributed will be able to see everything face to face and at the end the lump sum will be donated and people will know.

Sorry, Im still young and learning and didnt know the legal issues dealing with this and wanted to check. So it will be a for profit organization.
As of now its 100% targeted towards the cause. Where the website and events will be called "contribute to the blind" kind of thing. Or would it be less sketchier of I just started off a business idea instead, and just on the business idea say 40% of it will be donated to charity, will it be a better idea doing it that way?

[jasaunders]

When people evaluate charities to donate to, they look for a) whether its a nonprofit b) whether they could receive a tax deduction and c) the percentage of donations going to the cause. Good charities have over 85% of proceeds going directly to help whatever it is they are helping.

If you are providing more of a service to charities (like Roger) then this may be acceptable.
However, if you are providing a medium for people to donate, I would find your business unacceptable if only 50-60% of proceeds are donated.

[errorinexcellence]

So my idea lets just use a car per say, car advertising. I plan to have the outter car divided into so many spots, and sell off each spot. Within that spot you are able to put whatever you like with some exceptions (no profanity or explicity material) but your website name, business, your name whatever..etc. So from there you are getting exposure to your website or business, your getting advertising. Its on the car, you will also get advertising and promoting to your busniess from the website that will be created dedicated to this. The car will also be in events, meets and such. So your getting advertising from this, which is why I cant have more than 85% donated because its alot to start up and such. But the plus side of getting promotion you are also donating to a good cause.

sort of get the idea?

[jasaunders]

It seems to me like you are running a for-profit business with a sales promotion that donates proceeds to charity to gain more sales.

Just like my scrapbooking business donates a percentage of sales to the Susan Koman Foundation for Breat Cancer Awareness month. We care about supporting breast cancer, but I'm not going to lie, it's also a sales promotion.

[errorinexcellence]

Yeah the more I think about it, your right it is a sales promotion but essentially the profit margin is going to be extremely low. im more concerned about reaching out for the cause than making money because of a friend really closed to me told me her story which gave me the idea of this.

Is it a good idea? or would the community frown upon such thing?

so it would be registered as a business, what about giving out tax reciepts and such?

[jasaunders]

If you are doing it more to help the cause, you may be better off filing as a nonprofit. You can pay yourself a salary from the nonprofit.

[rogercbryan]

errorinexcellence- I'm still trying to get a firm grip on what your plans are. This isn't all that complicated. Did you take some time to read over the resources I provided? I would start by becoming knowledgeable of the IRS regulations governing what you want to do. These types of ventures can be profitable for everyone involved, but you have do them exactly how the IRS requires or you will end in a heap of trouble.

Every fund raising venture has a different expected return to the charity.
Straight cash: 80-95%
Event: 25-75%
Car Donations: Min 50%
Salvage Clothing Operations: 10-50%
Post sales donations (of for profit items): 1-15% (I think this is what Joshua's company might be doing)
*These numbers are not exact they are simply what I've seen in the 8 years I've been doing this.

There are a lot of professional consulting companies that do fund raising for non-profits so your idea is not a new one. Do some research and you'll find the answers to all the questions you have. The key here is transparency- Don't get greedy. Make sure you're books are open to everyone and anyone at all times. If you live by that rule you should have a great deal of success in this line of work.

[errorinexcellence]

Im in canada so I woudlnt go by the IRS but thanks for the link it gave me general information and what to expect.

Do you got an email address I can email you at to give you my idea ?

thanks

[rogercbryan]

rbryan@charitydispatch.com

[ScottRobertson]

From what I gather, it would seem a non-profit organization best suites your goals.

As Josh was saying, this does not mean that you do not make any money - you pay yourself a salary for your efforts. Look up financials from large non-profit organizations (ie. Red Cross) - you will see that the President gets payed hundreds of thousands of dollars. These are some of the administrative costs that you will see outlined in "where the funds go" type sections. Good luck.

[Warranties-For-Less]

Interesting,

Having been a 501 (c) 3 non profit organization, I can tell you this, with the amount of paperwork, and reporting requirements, I doubt you are going to want to go through it all just for one fundraiser event or special cause you want to fund.

A better option is to use Fundraiser software program to get started, it is only $4.99 and you do not have to go through all the legal loopholes to raise what ever amount you want and you can do with it what you want, donate it all, or use it to launch your fundraiser which to do legally will cost a few thousand since you have to form a company first before registering as non-profit.

I have used this system to fund a start up company, and it is far less complicated than starting a non profit company to raise funds for your cause or whatever. Worth a look, send me a PM and I will send you the company name and link. With little more than passive effort you can raise $34,000. with only $10. start up cost. This is a very unique program for raising start up capital for any reason.

Good luck to all, Mike