Crowdfunding - raising money for a cause by soliciting a large number of people through social media and online platforms - is impacting the way in which society supports charitable organizations. In 2015, it generated more than $34 billion worldwide.
With such strong momentum and interest, nonprofits are looking into how they can successfully leverage crowdfunding to increase contributions, attract new donors, and grow awareness and impact of their mission. While a powerful tool, crowdfunding also raises a host of legal issues nonprofits should be aware of, including:
- State charitable solicitation laws and regulations that may apply
- Avoiding acting as a conduit for charitable funds to flow to others without appropriate oversight
- Management of any crowdfunding purportedly on behalf of a nonprofit by unauthorized individuals
- Providing transparency regarding any fees charged by a crowdfunding platform and the amounts of funds going to a nonprofit
- Donation substantiation requirements
- Maintaining realistic expectations and budgeting plans when launching a crowdfunding initiative
- And more.
We’ll also review examples of successful and not-so-successful nonprofit crowdfunding campaigns to illustrate traps and tips nonprofits should know.