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I'm about 95% into what started as a personal project but has developed into a nice website with some interest. It's a distributed-donation platform for donating to charities.

Here's a quick description of how it works:

Users (donors) purchase credits via paypal in these increments: £10, £20, £50, £100, £200 (a paypal processing fee is added on). 1 credit = £1. Then they browse through charity profiles clicking the +£1 button when they want to donate. This effectively donates £1 to that charity. Of course they can click it multiple times or choose a higher value to donate. At the end of each calander month I will tally each charity's total donations, and deposit into their bank account.

I plan on introducing a small subscription fee to cover costs, etc.

So, for charities to register they must provide an original bank statement from the last 3 months which states their bank account details. I'm using Paypal so I don't have to worry about holding credits/debit card details. Unfortunately this introduces paypal processing fee's.

Before enabling sign-ups I really need to know whether I'm going to come up against any legal problems first. i.e:

  • Do I need to become registered/certified, etc. to take donations for charities?
  • Is there a problem with taking subscription fee's?
  • What sort of company will I need to register? Ltd? It'll be UK based.

I plan on starting out with charities regsitered in the UK but then if it proves popular opening it up to other countries. They don't have to be based in the UK; just a UK registered charity/non-profit.

I've built in the ability to purchase 'Gift credits'. I'd really like to push this in the future. I always ask people to just donate to charity for me for my birthday, etc. I like the idea that someone could buy me these 'credits' and I can choose who to donate too.

For more info see http://givestre.am/

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2 Answers

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Basically your problem is the ignorance if you go forward with this.

Legal:

for charities to register they must provide an original bank statement from the last 3 months

This is not a charity, this is hogwash. They should submit your their legal paperwork that proves they are a charity. Charities are legal constructs.

Financial:

If I donate to a charity, I expect a receipt from the charity because the submission is tax deductible, i.e. it reduces my taxable income. This is what the special status of a charity is all about, under legal. Your approach takes this possibility away from me, so - sorry - you only get pocket change, not the real donations.

•Do I need to become registered/certified, etc. to take donations for charities?

You need to be registered to run a business activity. Taking money obviously is one.

•Is there a problem with taking subscription fee's?

No. The question is who pays you - user: tax deduction problems. Charity - paperwork requires.

•What sort of company will I need to register

Does that not already make the first question ridiculous, because founding a company IS a registration of some sort? ;) I would start a ltd, but then - the exact differences depend on your long term plans which you don't say anything about.

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Bit of a harsh answer but I appreciate your response. You have highlighted some areas that need re-thinking. I will update my question with more info on where I want to take this. It'll be a small subscription from the charity. Nothing like what JustGiving takes (£15pm then 5% of each donation). – iamjonesy Mar 19 '12 at 14:03
up vote 1 down vote

Start with NetTecture's answer. Then read PayPal's term of services. They take issue with people receiving payments for goods that don't exist and for passing money around:

From https://cms.paypal.com/us/cgi-bin/?cmd=_render-content&content_ID=ua/AcceptableUse_full

(e) are by payment processors to collect payments on behalf of merchants

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Thanks Alain, I have contacted compliance@paypal.com which I got through your link – iamjonesy Mar 19 '12 at 16:18

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