Note that corporate sponsorship can lead to an unintentional tax liability, even for tax-exempt nonprofits. We advise you to read the Nonprofit Council`s resources on the tax treatment of business sponsorship income, so that you can distinguish between a company`s tax-free contributions and a company`s payments to the nonprofit, which characterizes the IRS as “unrelated business income.” Sponsorship from the business world can be an effective way to set up a nonprofit`s fundraising network and secure the funding needed to host large events. In turn, sponsors enjoy unique advertising opportunities and an increased perception of being community-oriented. The backbone of an event sponsorship is the sponsorship contract. While the agreement contains provisions in favor of the sponsor (since it pays for services), it also contains limitations of liability and other provisions in favor of the charity in order to contribute to the protection of the charity, both with regard to the organization of the event and its authorization to the promoter to use the name of the charity. Corporate sponsorship is a type of marketing in which companies fund charity, sports or public celebration activities. These companies develop sponsorship agreements with for-profit and non-profit agencies in return for the brand awareness and increased visibility that the event brings to the general public. Regardless of the type of sponsorship, the contracts that detail these agreements have several elements in common and achieve similar goals. Sponsorship contracts are often negotiated as important contracts on both sides. Both the business sponsor and the non-profit organization want to ensure that the agreement is fair and beneficial to their cause.
A typical agreement contains terms such as: My organization is in the process of approaching companies for sponsorship by offering marketing opportunities (mainly advertising in printed materials, but also event sponsorship). All the advice I`ve read is, “Get a contract signed.” All advice on what should (or should not) be included in the contract is received with gratitude. While sponsorship deals aren`t long, they can open up traps for reckless nonprofits. Ideally, a nonprofit has a preferred form of sponsorship agreement that is ready before it reaches the contract phase. But many corporate sponsors will have a preferred form of sponsorship contract. A nonprofit should be reluctant to accept terms that it does not wish to repeat in future contracts, especially if it intends to continue working with a sponsor. Corporate sponsors attract the attention of for-profit companies, as sponsorship offers public recognition of the company`s connection to a particular public utility purpose, which can help companies attract new customers or boost the company`s reputation due to the nonprofit`s goodwill “halo” effect. Non-profit organizations, on the other hand, receive financial support and can also benefit from increased attention from the media and the public, in-kind services and/or product donations. Corporate Sponsoring Support is a payment from a company to a non-profit organization to promote the mission of the nonprofit, which is generally recognized by the nonprofit with confirmation that the company has supported the nonprofit`s activities, programs, or special events. The sponsorship agreement should contain specific details about the sponsored activity. For example, if the sponsor agrees to fund a special event, the agreement should include the name of the event, the location, and the expected dates and times. The agreement should also indicate the types and locations of business signs that the proponent may display during the event.
The contract must also prohibit organizers from showing signs directly in competition with the sponsor`s brand.