What are non-profit position titles

Legal Issues of Advertising for Nonprofits


1 Introduction

2 non-profit status
2.1 Creation of the non-profit status
2.2 Criteria for Non-Profit Status
2.3 Advantages and disadvantages of non-profit status

3 Advertising Law
3.1 Competition Law
3.2 Laws against unfair competition - UWG
3.3 Misleading Advertising
3.4 Emotional advertising in the new competition law

4 Cause Related Marketing
4.1 Study: Cause Related Marketing - The Status Quo in Germany
4.2 Results of the study
4.3 Conclusions

5 final thoughts

6 Bibliography

1 Introduction

“There are three types of advertising.

Loud, louder and dishonest. "

Werner Mitsch

Advertising is an aspect that has an increasingly broader influence in our lives. There is hardly an area of ​​life in which one is not confronted with advertising in the broadest sense on a daily basis. Advertising for their own purposes is also becoming increasingly important in the work of non-profit organizations.

In my thesis “Legal Issues of Advertising for Non-Profit Companies” I would like to deal with the question of whether it is actually necessary, appropriate and sensible for non-profit companies to use advertising as a means to achieve their goals. As long as there are non-profit organizations, government support and the willingness of the population to donate have been sufficient to finance them. In recent years, however, it has been shown that the area of ​​non-profit organizations is increasingly adopting advertising and cooperation with commercial companies.

In this thesis I will first deal with the general conditions as well as the advantages and disadvantages of non-profit status as a status for companies. Furthermore, I will explain the special features of advertising and competition law that are important in connection with advertising and non-profit making. The fact of misleading advertising in the law against unfair competition will be of particular importance, as this could result in most legal difficulties for non-profit companies.

In the last chapter of the thesis I will explain a marketing strategy that has been established in the past two years in the cooperation of commercial companies and non-profit organizations. Cause related marketing is now widely known to the public through campaigns such as “With every box of Krombacher you buy, you protect one square meter of African rainforest” or the Volvic drinking water initiative. Little is known, however, about the legal background and the resulting problem areas, which both commercial companies and, above all, non-profit organizations have to deal with in order to avoid possible legal consequences. I will present this legal background in detail in this thesis and show why it should be so important for non-profit companies to deal with these legal issues in detail in the future.

2 non-profit status

2.1 Creation of non-profit status

The idea of ​​non-profit status has existed since the Middle Ages and was used at that time under the umbrella term “piae causae”. This encompassed all ecclesiastical, religious and social matters and allowed private individuals to carry out “common good” activities in organizational forms. Institutes of the foundation came into being, which in most cases were under the church administration.[1] Charity and piety determined the image of the foundation system until well into the 19th century. It was only with the fall of the “Städel Foundation” in Frankfurt that worldly thinking “Legists” prevailed and the term “non-profit” became generally applicable.[2] The charitable status does not come from civil law, but from tax law and primarily includes certain tax benefits. Nevertheless, there is a close connection between tax law and private organization law in the area of ​​non-profit law. Failure to comply with the articles of association can have consequences in civil law and endanger the tax status.[3]

Compared to commercial companies, non-profit companies do not strive to make a profit, but rather focus on ideal goals and the common good. In addition, the recognition of the non-profit status has various effects on the level of tax liability of companies and increases the possibilities of obtaining public grants.

2.2 Criteria for Non-Profit Status

In the tax code, tax law defines the legal framework for the requirements for recognition as a non-profit company.

In order to be able to obtain the status of the non-profit status, a corporation, resp. a company only “exclusively and directly” pursues charitable, charitable and church purposes. Economic purposes are generally not permitted.[4]

The corporation must have statutes from which it must be clear whether the prerequisites for tax breaks are met. The funds available may only be used for statutory purposes. The orientation of the activities of a non-profit enterprise may only be “exclusively and directly” for the selfless promotion of the general public in material, intellectual or moral areas.[5] The tax office decides on the non-profit status in the assessment procedure for corporation tax.

In order to provide the tax office with regulations for easier decision-making, the Federal Ministry of Finance is currently working on a draft bill for the 2009 Annual Tax Act. In this draft bill, right-wing extremist institutions are finally blocked from becoming a non-profit organization. This is to ensure that extremist ideas can no longer be promoted.[6]

2.3 Advantages and disadvantages of non-profit status

Anyone who wants to found a non-profit corporation has to decide whether it makes sense for the institution to recognize the non-profit status, because the status of the non-profit status brings not only advantages for a company, but in some cases also considerable disadvantages. In the following, I will explain these advantages and disadvantages of non-profit status as a tax law fact in more detail.

The most significant advantage that the status of non-profit status brings with it are certain benefits in terms of tax. This primarily includes tax exemptions in the area of ​​corporation and trade tax. There are further tax advantages in the area of ​​sales tax. For example, taxable sales of a special purpose establishment only have to be taxed at the reduced tax rate of 7%.[7] Last but not least, it is a great advantage for non-profit companies that they are allowed to receive tax-privileged membership fees and to carry out asset transfers for the establishment of charitable foundations without having to pay inheritance tax.[8]

Another key advantage of nonprofits over commercial companies is a much broader range of fundraising opportunities. In addition to generating sales, they can also use monetary and material donations as well as public grants and subsidies for their work to finance their work. This raising of additional funds is also facilitated by the broadly positive image most nonprofits enjoy with the general public.[9]


[1] see Schauhoff 2000, p. 7

[2] see Schauhoff 2000, p. 9

[3] see Schauhoff 2000, p. 7

[4] see Tax Code § 51-§ 68

[5] see Boochs 2000, pp. 15/16

[6] www.bundesfinanzministerium.de

[7] USTG Section 12 (2) No. 8a

[8] See Schauhoff 2000, pp. 18-19

[9] See Jachmann 2003, p. 226

End of the reading sample from 17 pages