Do You Need a License to Collect for Charity?

by Elizabeth Rayne
Many states require a license to solicit donations.

Many states require a license to solicit donations.

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Most states regulate fundraising to protect the public, corporations and any potential donors from fraudulent solicitation. Many charitable organizations must register with the state, and individual fundraising professionals must hold a license before they may fundraise. Although the law differs from state to state, it is important to understand the requirements before you or your charity begin fundraising.

Registration of Charitable Organizations

In many states, charitable organizations must obtain a license before soliciting any donations. Charities can apply for a license by providing the state with details about the organization, such as its purpose, operating budget and the names of its directors and officers. Depending on the laws of the particular state, there may be exemptions for charities under a certain budget, churches, schools or other specific types of organizations. States generally impose a fee for registration.

Professional Fundraisers

A charity may hire a professional fundraiser to solicit funds for the organization. Services of a professional may include planning events, managing donations or making direct solicitations for donations. Generally, professional fundraisers must hold a license from the state before being paid to fundraise for a charity. Like an organization applying for a fundraising license, the professional must submit an application to the state with personal information and the registration fee. In addition, some states require the professional fundraiser to disclose to potential donors that she is both licensed and being paid by the charity to collect donations.

Reporting

Many states require both registered charities and professional fundraisers to file annual reports with the state. Generally, the report must include financial information, such as recently filed tax returns. The state may also require professional fundraisers to list how much they personally raised for a particular charity, as well as the income they received from the charitable organization.

Penalties

If a charity or a fundraising professional does not properly register before collecting money from the public, the state may impose penalties, including fines or even jail time. In some states, a fee is assessed based on how many individuals were contacted for donations. The state may even order the charity to return any donations they received. Further, if the state finds that an individual or organization intended to deceive or defraud a charity or individual, larger fines and imprisonment are more likely.