Commercial Co-Ventures and Cause Marketing
Nonprofits that enter “share of revenue” contracts with for-profit companies are engaging in commercial co-ventures. Known in the for-profit world as cause marketing, these public-private sector partnerships can be terrific for both venturers. However, they do require specific licensing.
- Definition - Commercial Co-Venture
- An agreement between a nonprofit organization and a for-profit business that serves to support charitable causes while generating commercial goodwill. Common features include, but are not limited to, a share of revenue being donated to the charity, a charitable event underwritten by a business, and activities of any kind that are advertised to benefit a charitable organization.
Who are commercial co-venturers?
For-profit companies with well-developed corporate social responsibility programs are increasingly partnering with charities. These partnerships serve two purposes: the for-profit brand is able to more closely align itself with the interests of its customers, and the charity benefits from the financial support the business provides. Anytime private industry becomes so closely entwined with the public sector, government must ensure the interests of both are kept in check. As a result, licensing is required for these agreements, and both the charities and companies have obligations to meet.
To start, the charity will need to have its solicitation registration in order, and the business may need to be licensed as a commercial co-venturer. At least 24 jurisdictions have some requirements specific to commercial co-ventures, and most of the filing requirements fall on the business. While only four states require a formal license (see our state-by-state requirements guide at the right), the others may require filing of the contract, disclosures in advertising, state-specific language to be included in the contract itself, some form of accounting or recordkeeping, or a final financial reporting. Charities should view commercial co-ventures as a positive opportunity but should only engage once they’ve ensured all proper licenses are in place.
Know Your Commercial Co-Venturer
As with professional fundraisers, commercial co-venturers should independently comply with registration, reporting, and disclosure requirements outlined by charitable solicitation laws. However, given that these for-profit companies are largely unaware of the registration requirements for fundraising, it often falls on the charity to educate their partner. Any arrangements for share of sales agreements, event underwriting, or other ventures should be in writing. You may need to file each new contract with the jurisdiction authority.Continue reading “Charitable Gaming Compliance”
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