Germany is a country of associations. Almost one out of two Germans is a member in one of the 600.000 existing associations. Some may wonder about the reasons. One answer is definitively hidden in the German culture. Germans are usually well organized and also do things very correctly. A formal and written statute transforms a mere group of persons with a common purpose into a well-defined permanent association where roles are assigned through the different organs. This sense is confirmed by an official name which makes the group appear externally as a unit, independent in its existence from changes of members. This is exactly how an association is defined by §§ 21 ff. BGB.
The second answer lies in the several advantages an association has in comparison to organizations without any written statute or other formal organizations as enterprises. One big advantage is the reduced liability for its members. In most cases, they are not liable with their private assets. Another benefit of a recognized non-profit association lies in the taxing. Not only is the association exempt from taxes but may also emit donation certificates implying in taxation discounts for the donators. Moreover, are taxes to be declared only every 3 years. Additionally, an association is a juridical person and accepted by public. Consequently, it is enabled to receive subsidies, grants and donations. One last major advantage that has still to be mentioned are the very low founding costs of around 100-150€.
Before the steps for the founding will be outlined, some risks and responsibilities are to be stated. For sure, the biggest risk is the liability of the board of directors. Even if they volunteer without any financial reward and the engagement of the association is selflessly social, they may be liable with their private capital. This is always the case whenever they intentionally or negligently do not fulfil their duties, especially with regard to outsiders. The right insurance can help to reduce this risk to a minimum. The responsibilities imply in a correct accounting and damage-avoidant behavior towards all parties. Especially the accounting of an association can be very tricky for newcomers in this field. The good news is that towards insiders, their liability may be restricted to the association´s capital within the statute.
In order to found a registered association, 3 steps are necessary. First of all, at least 7 like-minded members have to be found. Secondly, they have to meet in order to execute the founding itself. In this assembly both the statute has to be agreed and signed and a board of directors elected. As the statute is the legal basis of the association, it ideally has been drafted and checked from the outset by someone specialized in this area. The board also has to draw up a protocol of the founding. Last but not least, the association has to be registered. Only those groups that pursue a non-profit purpose can enter into the register of associations. The executive committee must submit the application, the signed protocol and the statute to the local court, where the register of associations is kept. All documents have to be signed accordingly and certified by a notary. Once the registration did take place successfully, the association receives the annex “e.V.” (registered association) and subsequently its registration and tax number. It now is ready to perform and fulfil its intended purpose.
For assistance in funding associations anywhere in EU, contact us:
Benjamin Schneider
Email: bs@futurag.com
Futura Group’s Business consultant