Question if this is ok to do? Regarding LLC/non profit/donations

What is the name of your state (only U.S. law)? WA

Not sure if this was the right category...

Here is a little background info.
I run a website which helps members of the Drum and Bugle Corps activity (aged 14-21) gain donations to pay for their fees by creating a profile which they can share with potential sponsors. Sponsors can also sign up and find members to donate to. Each member belongs to an organization (several around the country) which fall under the activity and are all 401c3 non profits, however all donations going to those members are NOT tax deductible since they are applied to their fees (or tuition).

Once a sponsor makes a donation (pledge) the site will give the sponsor the groups information so that the sponsor can send in their donation directly to the organization. Currently there is no money going through my site. The site was launched in October and has already raised over $14k in donations for the members.

I originally wanted to make the site a non profit as well, but that doesn't look like it will be possible for awhile.. so my question is this:

Would it be legal (tax wise, etc) to accept the donations (I could call it anything I want) directly through the site via paypal, check, etc.. keep a small percetage (5-8%) to cover paypal fees and site maintenance? I would send the balance of the donation directly to each group myself. Currently I am paying for everything out of pocket including merchandise and promotional items, and programming the site myself (I'm a web developer).. I'm just trying to find a way to make a little income off of the site to cover some of the costs of running it.

Is there a good of doing this? I know there is a limit on sending donations to an organization based on your income, but I believe that only applies to tax deductible donations.. since these donations are not tax deductible, is there a limit or anything on what I can send if I was to make these donations myself?

Any advice would be great, thanks!

abda53 said:

What is the name of your state (only U.S. law)? WA

Not sure if this was the right category...

Here is a little background info.
I run a website which helps members of the Drum and Bugle Corps activity (aged 14-21) gain donations to pay for their fees by creating a profile which they can share with potential sponsors. Sponsors can also sign up and find members to donate to. Each member belongs to an organization (several around the country) which fall under the activity and are all 401c3 non profits, however all donations going to those members are NOT tax deductible since they are applied to their fees (or tuition).

Once a sponsor makes a donation (pledge) the site will give the sponsor the groups information so that the sponsor can send in their donation directly to the organization. Currently there is no money going through my site. The site was launched in October and has already raised over $14k in donations for the members.

I originally wanted to make the site a non profit as well, but that doesn't look like it will be possible for awhile.. so my question is this:

Would it be legal (tax wise, etc) to accept the donations (I could call it anything I want) directly through the site via paypal, check, etc.. keep a small percetage (5-8%) to cover paypal fees and site maintenance? I would send the balance of the donation directly to each group myself. Currently I am paying for everything out of pocket including merchandise and promotional items, and programming the site myself (I'm a web developer).. I'm just trying to find a way to make a little income off of the site to cover some of the costs of running it.

Is there a good of doing this? I know there is a limit on sending donations to an organization based on your income, but I believe that only applies to tax deductible donations.. since these donations are not tax deductible, is there a limit or anything on what I can send if I was to make these donations myself?

Any advice would be great, thanks!

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My initial feeling is that you should speak to an attorney who specializes in non-profits. I'm just not sure that you can say, "I want to make my site non-profit, but I won't be able to do that for awhile because (fill in blank), and I want to figure out a way to make a little income off the site to cover some of the costs running it. I'm trying to help so-and-so obtain donations through the site."

I know of a drum corps that goes out on the street with just a box for donations and does quite well. I'm always curious why donations have to become a business, complete with websites and payments through PayPal.

True, there are many ways of getting donations.. typically it has been going out to the streets, sending out letters and cold calling alumni and fans. With the site I am just trying to give another method of connecting members with potential sponsors, with a new method that is more time efficient and effective than the traditional methods. But yeah I don't know why something needs to be a business to do donations.. but I know there are benefits to it, like tax deductible donations..

I just want to be able to help more members get more money, and unfortunately in order to do that I need to make some income off the site.. to cover time developing it, promotions, advertising, etc.

who asked you to create the site? Are these beneficiaries even aware of your site and what you do?

What I see is somebody that unilaterally decided to create a website and offer information for some group. You now want to know how to turn that into making money from that site by charging for your services.

Is that anything close to the situation?

justalayman said:

who asked you to create the site? Are these beneficiaries even aware of your site and what you do?

What I see is somebody that unilaterally decided to create a website and offer information for some group. You now want to know how to turn that into making money from that site by charging for your services.

Is that anything close to the situation?

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No, sorry if that wasn't clear. The site is mine. I built it, I own it.. the site is free to use, but I want to find out if there was a legal way to handle donations through the site, instead of just being a middle man.. I would keep maybe 8-10% of each donation to cover paypal fees and site maintenance.

Donations through the site are anywhere from $5-$2000 so far. All donations currently go directly to each organization (the site just gives the organization information to the sponsor), however each org. has a different way of handling donations.. some take check, online, phone, paypal, etc.. and their process can be easy to use and some more complicated. So if I were able to handle donations from the sponsors directly and send it to the organization myself, I would be able to make the process a lot faster, easier and more efficient for sponsors to make donations.. plus I would be able to accurately track donations that are made through the site (right now each sponsor and member have to manually update their account)

Noone asked me to create the site. I created the site out of a need for it from what I saw last year. I noticed a lot of members of the activity were using Facebook to try to raise donations, so I thought that there should be a site that easily connects members with potential sponsors - sponsors that are there because they want to help out and donate.. no more cold calling and annoying people who aren't interested. I'm a web developer, so I decided to build it, however I'm also really busy with paying clients so this project ends up on the back burner a lot.. which is why I'm hoping to get income off of the site so I can spend more time working on it. I'm not trying to get rich off it, I just want to be able to make the site even better so the members can benefit from it even more.

As far as the beneficiaries, the site is spread via word of mouth.. I told roughly 15 people about the site once I launched it, and I've had over 1000 signups since.. which is good considering it's a relatively small activity. Almost every organization within the activity is also aware of the site and have provided me with their information for donations so that I can give it to the sponsors.


So I guess what it comes down to is, is it legal to accept money from people from online/mail and then send that money to an organization to go towards a members fees/tuition (is not tax deductible) without having to create a business, deal with IRS, etc.. I suppose I could just say that sponsors will just send me money and I can do whatever I want with it (like donate it to a specific person)..

I know there is a limit on tax deductible donations, but I don't think this applies. One person told me that the only way I could do this is that if I pool all of the money together and the distribute it evenly among all of the members that are part of the site, but that doesn't sound right for some reason.


Hope that helps! Thanks

so yes, I was right then with this:

What I see is somebody that unilaterally decided to create a website and offer information for some group. You now want to know how to turn that into making money from that site by charging for your services.

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So I guess what it comes down to is, is it legal to accept money from people from online/mail and then send that money to an organization to go towards a members fees/tuition (is not tax deductible) without having to create a business, deal with IRS, etc.. I suppose I could just say that sponsors will just send me money and I can do whatever I want with it (like donate it to a specific person)..

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what are you missing? At that point, you are charging a fee to handle the transaction. In other words, you are a business that is producing an income. You have to abide by the laws concerning such businesses.

In fact, you are working so hard to be a business, you are adding an additional step in the donation process just to justify taking money and are not even providing any additional services.

Also, there is no "donation" if the amount is targeted to a single person.

tranquility said:

Also, there is no "donation" if the amount is targeted to a single person.

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Not sure what you mean?


Thanks justalayman.. I see your point.. however there IS a service, and that is the service of connecting sponsors with the members of the site so that members can get donations. There are other things that are provided as well, but that is the main objective of the site. I do in a sense "just" provide the sponsor with information, but there is a lot more that goes into it.. but if you want to look at it that way, pretty much every site out there does the same thing.. connecting people together in a more efficient way than what was previously available.

Thanks justalayman.. I see your point.. however there IS a service, and that is the service of connecting sponsors with the members of the site so that members can get donations.

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but you are already doing that for free.

There are other things that are provided as well, but that is the main objective of the site. I do in a sense "just" provide the sponsor with information, but there is a lot more that goes into it.. but if you want to look at it that way, pretty much every site out there does the same thing.. connecting people together in a more efficient way than what was previously available.

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don't get me wrong. I see no problem trying to pay for the site or to make it a cash cow. That's the American way. The thing is; you are a business and it's that simple. You have income (hopefully) and expenses and that all needs to be accounted for. You don't have to have a big incorporated General Electric sized business but a business is a business.

justalayman said:

but you are already doing that for free.

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Very true, but I can't keep running or improving the site without income, because all of my time currently is spent building clients sites who pay, so they have priority. I'm paying everything out of pocket for the site to run.

don't get me wrong. I see no problem trying to pay for the site or to make it a cash cow. That's the American way. The thing is; you are a business and it's that simple. You have income (hopefully) and expenses and that all needs to be accounted for. You don't have to have a big incorporated General Electric sized business but a business is a business.

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Thanks. Right now the site has no income except $70 I received as a site donation lol but I'm also working on other methods for income for the site.. but like I said, I can't spend much time on it when I have paying clients that I need to do website work for.

I appreciate the replies

If I try to make a "donation" to a charity, but say it should go to benefit Bob, it is not tax deductible.

I cannot direct charitable donations to a specific person.

tranquility said:

If I try to make a "donation" to a charity, but say it should go to benefit Bob, it is not tax deductible.

I cannot direct charitable donations to a specific person.

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Yup that's correct