We’re seeing a lot of commercial co-ventures (CCVs) lately. It makes sense, right? CCVs can be a win-win for all parties involved – a company informs the public that it will donate a portion of its sales revenue to a nonprofit organization and, in return, the nonprofit allows the company to use the nonprofit’s brand name to market the product or service. (For example: “For every bottle of honey purchased in November 2018, Good Intentions Stores will donate 25 cents to the Fictional National Honeybee Preservation Society.”) Such collaborations can increase the company’s sales and goodwill, and the nonprofit benefits from donations.
Hold your horses, though – you have to keep some legal hurdles in mind before launching such an initiative. Many states’ laws have special requirements for CCVs, such as:
- The nonprofit must be registered to fundraise in the applicable state(s).
- There has to be a written contract between the nonprofit and the company. Some states’ laws require the contracts to include specific provisions, like a description of the goods and/or services to be offered to the public and the geographic area of the promotion.
- It’s sometimes necessary to file a copy of the written contract prior to the start of the promotion.
- Several states require registration and bonding.
- You have to keep a record of the sales during the promotion.
- You have to carefully word the disclosures in the promotion’s advertising (e.g., What portion of the sales price will be donated? What must customers buy to trigger a donation? How long will the promotion last?).
Failure to comply with the rules can have real-world consequences (think Attorneys General and the FTC knocking on your door). But don’t let the requirements intimidate you – our clients have found great success and rewarding experiences with CCVs.
[A special thank-you shout-out to our partner and charitable guru Andrew Grumet for helping with this post!]