Generally, a commercial co-venturer is a person or entity regularly and primarily engaged in commerce (other than in connection with raising funds for charities) that conducts a charitable sales promotion. Approximately 21 jurisdictions regulate commercial co-venturers engaging in charitable sales promotions. Only six states require registration though many others require a written contract, require certain disclosures, and impose record keeping requirements.
Some states have broader definitions than others. For example, Massachusetts includes in its definition of a commercial co-venturer “any person who promotes the sale of any good or service which is advertised in conjunction with the name of any charity.”
The states that regulate commercial co-ventures have different requirements but, in general, the legal requirements imposed by many of these statutes can include:
- A written contract between the charitable organization and the commercial co-venturer. Sometimes the state requires that certain provisions be included in the contract (e.g., a description of the goods or services to be offered to the public, the geographic area of the promotion, the beginning and ending dates, the manner in which the charitable organization’s name will be used, provisions for final accounting by the commercial co-venturer, and the date and manner in which the charitable organization will receive its benefit).
- A copy of the contract must be filed prior to the charitable sales promotion. Note that the charity, not the commercial co-venturer, frequently must file the contract.
- Registration and bonding of the commercial co-venturer. These include Alabama and Massachusetts.
- Drafting and filing the IRS exemption application (either Form 1023-EZ, Form 1023, 1024, 1024-A) and related statements
- The commercial co-venturer must prepare an accounting, retain it for a specified number of years, and make it available to state regulators and their charitable co-venturer.
- Disclosure statements to be included in the advertising.
- Nonprofits must disclose co-venture relationships on their charitable solicitation registrations.
Professional fundraisers are regulated in many states and require acontract between the professional fundraiser and charitable organization.
What many companies don’t know is that cause related marketingtriggers legal obligations for both the business and the charities that benefit.
As hundreds of pink products attest, cause marketing is bigbusiness in thiscountry. However, nonprofit and for-profit firms looking to takeadvantage of multi-jurisdictional fundraising and charitable sales promotionsneed to know that 40 states have laws regulating charitable solicitations.