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Richard - Bizlaw
Richard - Bizlaw, Attorney
Category: Business Law
Satisfied Customers: 9896
Experience:  30 years of corporate, litigation and international law
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Simply put Id like to know what legal requirements there are

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Simply put I'd like to know what legal requirements there are when using the word "donation." My friends and I are going to be working on a few businesses where we take money that comes in and part of that money goes to a cause, while the rest goes to the business/paying our team. Our organization at this point is not any kind of business entity, so can we legally refer to the entire amount of money that comes in as a "donation", even if it doesn't all strictly go to the cause? Would the use of the word donation technically require some kind of legal entity? Would we need to register as a 501c3, or would a simple LLC still work? Thanks!

bizlaw :

What are you providing to the person making the donation and what is the "cause" that money goes to? How much of the money collected is going to the "cause"? Is the cause a tax exempt non profit?

Customer:

Usually it would be in exchange for any transactions the people we send to them result in. So almost like an affiliate arrangement or marketing agreement that is based on results. The cause would be a group like the Red Cross, or Feed the Children - a large, well-known, well-established, tax-exempt charity. 50% will go to the cause.

bizlaw :

What is the value of your services if it was provided unconnected to any charitable cause?

Customer:

The value is that they get more clients, usually at a more efficient rate than they'd currently be getting. Basically, we analyze their marketing, figure out how much they are currently spending on marketing, and then they make the "donation" which would be less than what they are currently spending - make sense?

bizlaw :

As I understand you provide a marketing analysis and a portion of the cost of your services goes to the "cause" is that correct?

Customer:

Yes.

bizlaw :

You would have to disclose what portion of your fee went to the "cause" and only that amount would be a tax deductible donation. You cannot claim that the total fee is a donation.


If you need further help please do not rate 2 stars/faces "Helped a little" or 1 star/face "I expected more".This is considered a negative rating against me.


Just reply to me via the "CONTINUE CONVERSATION" or "REPLY" button with the questions you have as I receive no compensation for my efforts for the lowest two ratings.


Please keep in mind that I am trying to help you understand and resolve your situation. I don't make the laws, I am just reporting or interpreting them, so the outcome may not be what you had hoped for.



This communication is not intended as legal advice. A local attorney should always be consulted for legal advice. No client/attorney relationship is intended or created by this communication

Customer:

Ok, one more question, does this rule change if the group doing the analysis is a "council" or other community organization, rather than a business?

bizlaw :

No. The council would be providing services for fees which is ordinarily taxable income.


If you need further help please do not rate 2 stars/faces "Helped a little" or 1 star/face "I expected more".This is considered a negative rating against me.


Just reply to me via the "CONTINUE CONVERSATION" or "REPLY" button with the questions you have as I receive no compensation for my efforts for the lowest two ratings.


Please keep in mind that I am trying to help you understand and resolve your situation. I don't make the laws, I am just reporting or interpreting them, so the outcome may not be what you had hoped for.



This communication is not intended as legal advice. A local attorney should always be consulted for legal advice. No client/attorney relationship is intended or created by this communication

Customer:

Ok thanks!

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