Foundation of a non-profit association

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The foundation of an association is in principle no witchcraft. You just have to know how. However, not all initiatives are fortunate enough to have an experienced lawyer in their ranks and have corresponding difficulties with regard to the legal requirements. Therefore, the most important steps and potential (legal) pitfalls will be presented in the following.

When setting up a company, care should be taken to follow these steps:

  1. Write down your self-conception
  2. Create statutes
  3. Reconciliation with the tax office
  4. Founding meeting

Step 5: Registration with the register of associations

Although this sequence takes some time, it can also save time in total. For example, lengthy disputes with the tax office are avoided in the event of an audit due to the early coordination procedure. The individual steps are described in more detail below:

Step 1: Write down your self-conception

What does the association stand for? What exactly should the task of the association be? To which target group is the association aimed? These are all questions that should be clarified as far as possible in advance. At the latest when the purposes of the association must be formulated when the statutes are drawn up, there must be clarity here. For this purpose, for example, a mission statement can be developed, the contents of which can also be easily integrated into the statutes later on.

Step 2: Create statutes

The German Civil Code (BGB) contains many regulations on the structure and organisation of associations. When drawing up a statute, it is therefore not necessary to regulate much additional content. However, it is recommended to regulate at least the following components:

  • Name of the association
  • Purpose of the association
  • Seat of the association
  • The statement that the association is to be registered
  • Admission and resignation of members
  • Duty to contribute
  • Formation of the Executive Board
  • Prerequisites and form for convening the general meeting and notarizing its resolutions.

It can be helpful to use a pattern for a club statute and tick off the individual points in order.

The core of the statutes of a non-profit association is the formulation of its purpose. Here once a view is worthwhile itself in the law: in § 52 tax code (AO) is a whole catalog at possible purposes specified, which one examines best sequentially whether they apply to the own association or not. It is important that all purposes of the association are also reflected in the actual activities of the association. Otherwise one runs the risk that the non-profit status of the association will be withdrawn during an audit.

Step 3: Reconciliation with the tax office

Since the non-profit character is the linchpin for the possible use of tax benefits, the statutes should be agreed with the responsible tax office before the registration at the register court. The tax office where the association is based is responsible. Sometimes a long breath is required here. It may well happen that the tax office has some requests for changes in the formulation of individual contents of the articles of association. It could take a few weeks.

Step 4: Founding meeting

A founding meeting must be convened as an official founding act. Here the statutes are decided and the board is elected. It is important to keep proper minutes of the meeting, a sample of which can be found here.

Step 5: Registration with the register of associations

The last hurdle to be overcome when founding an association is its entry in the register of associations. The following documents must be submitted for this purpose:

  • Registration letter (signed and notarized by the Board of Directors)
  • copy of the articles of association with at least seven signatures of the founding members
  • Transcript of documents from which the appointment of the Board of Directors results (e.g. minutes of the founding meeting).

The district court in whose district the association has its seat is responsible. The register court now only checks the formal correctness of the submitted documents and the regulations on internal organisation contained in the statutes, i.e. association name, entry and exit of members, membership fees, passing of resolutions, etc.. The non-profit status will no longer be checked at this point. It is therefore important to clarify this point in advance with the tax office in order to avoid unpleasant surprises at a later date.

Further information:

Stories of success:

The Munich Nutrition Council founded itself in 2017 as a non-profit association. Fortunately, two lawyers were involved in this process, for whom the drafting of the association’s statutes was not only bureaucratic torture, but in some places even associated with passionate zeal. We were particularly pleased, for example, by the discussion on systemic consensus as a new form of decision-making that should be included in the statutes instead of the principle of majority voting. Until the founding act, the group had already worked successfully with the system of sociocracy or the consensus principle. Decisions only mature when there is no serious objection from any of the members. However, it seemed problematic to us that the law only seems to know majority voting. It therefore seemed to us to be a bit too delicate to completely exchange the decision-making mechanism. Nonetheless, with our statutes we wanted to send out a signal that there are other forms of decision making that may be closer to the requirement for a generally acceptable solution than by conventional means. Therefore, we decided to include the following passage in our statutes: “The systemic consensus procedure may be applied during and/or before the general meeting to prepare the resolutions”. We are curious about our experiences with the implementation.