Surprisingly, many for-profit companies have raised a fair amount of capital by simply asking for donations to their organization. But because your company is not an established a non-profit, it is important for your donors to understand that you will not be able to provide them tax deductions. Your “donations” will be considered taxable income.
An easy way to solicit donations to your company can be as simple as using a Paypal button on your site. However, be careful to not use the term “donate” when using Paypal, as that term refers only to contribution to charities. If Paypal sees you violate this term, they will make you return every donation given to your business. Instead, you can use phrases like “support our business”.
One of the most notable companies to use the donation strategy is the web tycoon Wikipedia, which raised $20 million in its annual appeal for donations. This phenomenon of Crowd Sourcing, in which a venture asks members of the general public for funding through many small donations, is growing and growing strong. To read more about Crowd Sourcing, take a look at our past blog.