Does Your Nonprofit Need to Register?

Registering in all the states that require it would cost up to approximately $3,000, depending on the size of your nonprofit.

Nonprofit fundraising registration takes time and costs money. Most states charge an application fee to register, ranging from as little as $10 to over $400. Registering in all the states that require it (39 plus the District of Columbia) would cost up to approximately $3,000, depending on the size of your nonprofit. If your nonprofit engages in nationwide fundraising, you’ll have to bite the bullet and register in every state. But if, like many smaller nonprofits, you fundraise in only one or a few states, you can minimize your registration costs by not registering in every state that requires it.

Where Is It Worthwhile to Register?

Your nonprofit should always register in your home state, unless you are exempt or it is located in one of the 11 states that do not require registration. Given their importance as financial and philanthropic centers, you may wish to always register in New York and Washington, D.C. However, when it comes to registering in other states outside your home states, you should look at how much your nonprofit actually receives in donations from residents of such states. Unless you receive at least $250 in donations each year from a state’s residents, it makes no sense to register there because the cost of registration will exceed the value of the donations your nonprofit receives from the state.

If your nonprofit has been in operation for a while, carefully examine your fundraising history to examine which states the bulk of your contributions come from. If, like most nonprofits, your nonprofit is a local or regional organization that only receives donations from residents of one or a small handful of states, it may only make sense to register in those few states. On the other hand, you may want to register in many states if your nonprofit actively fundraises nationally by sending emails or other fundraising materials to residents of all or many states.

Almost half the population of the United States resides in just ten states that require registration: California, New York, Florida, Illinois, Pennsylvania, Ohio, Michigan, Georgia, North Carolina, and New Jersey. You might conclude that it’s only worthwhile to register in these larger states. Or, you might want to cast your registration net wider and include all states with populations over 5 million. There are only 20 such states. Certainly, unless it’s your home state or you intend to solicit there, there would seem to be little reason to register in a very small state like North Dakota or Rhode Island.

Strategies to Avoid Registration

If you’re not careful, your nonprofit will be legally required to register in states from which you receive only a few dollars in contributions. Indeed, you may be legally required to register in states where you don’t receive contributions from any residents at all. Remember, it’s asking for contributions, not receiving them, that triggers the registration requirement.

Unless your nonprofit is exempt from registration in a state that requires it, there is only one way to avoid having to register there: You must not solicit contributions in that state. This means you must not ask for donations from state residents in writing, in person, or through the media (including the Internet). Moreover, you must not hire fundraisers to solicit on your behalf in the state. This can require a good deal of care and discipline. For example, if your nonprofit has a newsletter distributed by postal mail or email that contains an appeal for contributions, you have to make sure you don’t send it to residents of states in which you haven’t registered.

If, like most nonprofits, your nonprofit has an interactive website—that is, a website that contains a “donate now“ button or other means of accepting online donations—you should place a disclaimer on it making it clear that you do not accept donations from residents of the state or states in which you do not want to register.

If your nonprofit accepts online donations, you should consider using donation software that permits you to block donations from residents of the states you select. This software can even eliminate selected states from the pull-down menus donors must use to make their contributions.  For detailed guidance on all aspects of the state fundraising registration process, including each state’s rules on renewals and financial reporting and links to all the forms you need, refer to  Nonprofit Fundraising Registration: Nolo’s State-by-State  Digital  Guide  (updated quarterly).

 

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