Guide To Founding An Association English

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Guide to

founding an association

§
§
When people get together for joint activities or projects,
legal issues arise. This concerns, for example, liability
and the co-determination rights of those involved. This
getting-together is regulated by law. But it can also be
organised through contracts. This also applies to the
founding of associations..

What if we do not regulate anything at all?

If the association does not have any special rules, it is


usually treated as so called GbR (Gesellschaft bürgerli-
chen Rechts). A GbR can also be called a BGB (German
Civil Code) company. In this case, all participants have
the same rights and obligations. However, they are
liable for the debts of the partnership. In addition, such
a GbR is automatically dissolved if one of the partici-
pants leaves.
Vertrag

CONTRACTS ARE IMPORTANT!


Even if the parties involved do not regulate their coop-
eration through contracts, legal regulations apply.
However, these are often not optimal. Above all, one
should bear in mind: contracts (including the statute
Ver
trag of an association) are made for the event of a dis-
pute! As long as everyone agrees, agreements can be
changed at any time. If there is a dispute, it can jeop-
ardise the project because money is often at stake.

A registered That is why it makes sense to give such projects a firm


association is a legal framework. Here, a registered association (e. V.)
suitable organisation if is a good choice if
a larger number of people
want to run a project that is 9 a larger number of people join together for a
not predominantly about non-economic purpose and
economic activities.
9 the joining and leaving of members should be
uncomplicated.

HOUSE OF RESOURCES 1 GUIDE TO FOUNDING AN ASSOCIATION


Why found an e. V.?

Advantages of the e. V. are:

9 The participants are not liable for contractual


obligations of the association. Above all, the Kochclub
Kreuzberg e.V.
members are well protected.

9 The e. V. may bear its own name, it can conclude


contracts (through its board).

9 The e. V. can be a non-profit organisation (a GbR,


for example, cannot be).

9 The members have equal rights and duties, this


applies above all to co-determination.

9 The costs for the foundation are not high.


Disadvantages of the e. V. are:

It cannot be predominantly economically active


2
(e. g. run a restaurant or a shop).

It needs at least 7 members.


2
Founding a
A statute must be drawn up and the association
2 registered association
must be registered with the ‘register of
is worthwhile especially
associations’.
if the association wants
to receive funding.

WHAT IS THE ‘REGISTER OF ASSOCIATIONS’?


The register of associations (Vereinsregister) is a
public register kept at the local court of the city or Vereinsregister
district. In particular, the name of the association
and the names of the board of directors are entered.
Registered associations receive an extract from the
register as proof, which they need, for example, to
open a bank account.

HOUSE OF RESOURCES 2 GUIDE TO FOUNDING AN ASSOCIATION


What does it cost to found an e. V.?

Registering an association with the local court


currently costs 75 euros in Berlin. The costs for
certification and the registration procedure by a
Notarin
notary are about 70 euros.
Amtsgericht

There are no further costs unless you hire a lawyer


to draw up or change the statute.

If changes are made after the foundation, e. g.


change of the board, amendments to the statute,
fees will be charged again.

The unincorporated association

The unregistered (non-legal) association is quite


common. It can also – like the GbR – come into
being “automatically”, if the following characteristics
Team Sorglos
are fulfilled:

9 It has a management, i. e. someone who takes


care of the organisation.

9 At least three people are involved.


9 The association does not dissolve when
members change.

9 It has its own name.


§
Legally, the unregistered association is largely treated
in the same way as the registered one, as long as it Team Sorglos Kochclub Kreuzberg e.V.

does not engage in economic activity.

HOUSE OF RESOURCES 3 GUIDE TO FOUNDING AN ASSOCIATION


Disadvantages of the unregistered association
are above all:

The members are personally liable if the


2
association is economically active.

It does not have an account in its own name


2
with most banks.

It often does not receive funding.


2
Therefore, it is often more favourable to found
a registered association.

An unregistered association is particularly


suitable if the association only moves a small
amount of money and does not organise events
or carry out economic activities.

The steps in founding a registered association

At least three members are needed to found a


registered association, and seven to register it
The registration of with the register of associations. Once the asso-
the association and the ciation is registered, the number of members may
non-profit status can fail not fall below three, otherwise the association will
due to minor formalities. be deleted from the register.
That is why you should
seek professional
help here.

HOUSE OF RESOURCES 4 GUIDE TO FOUNDING AN ASSOCIATION


Incorporation proceeds as follows:

The participants must draw up a constitution.


 Satzung
It contains the most important regulations for
their cooperation in the association. Certain
clauses are required by the register court in
order for the association to be registered.
Finanzamt
If the association is to become a non-profit

organisation, the statute should be sent to zun
g
Sat
the tax office for examination before applying
to the register of associations. The tax office
checks free of charge whether the association
can become a non-profit organisation with this
statute.

The participants hold a first meeting (formation



meeting). There

9
it is decided that the association will be
founded,
9 the statute is adopted,
9 the board of directors is elected.
Satzung
The statute must be signed by at least 7 members.

Minutes shall be taken of the formation meeting.

The elected board members must appear with

the statute and the formation minutes at a notary
public, who certifies the formation and registers
the association with the ‘register of associations’.
Satzung

If the registry court finds no errors in the statute of


 Protokoll

the association and the minutes, the association is


registered and the association receives an extract
from the register as confirmation.

HOUSE OF RESOURCES 5 GUIDE TO FOUNDING AN ASSOCIATION


The statute of the association

The drafting of the statute of the association does not Mustersatzung

necessarily require the assistance of a lawyer. The


widely available model statutes are usually a good
guide. The statutes of an association with similar
activities are also helpful. Many associations publish
their statutes on the internet. Incidentally, you will
not be able to inspect the statutes of registered
associations at the ‘register of associations’ unless
you can give an important reason.
Vereinssatzung
The statutes must contain the following information
and regulations: § Vereinsname

9 Name of association § Vereinssitz

9 Registered office of the association


§ Eintragung Vereinsregister

(indicate only the town, not the street)


9 Regulation on the registration of the association § Vereinszweck

in the register of associations


§ Aus- und Eintritt

9 Purpose of the association


9 Expulsion and admission of members § Mitgliedsbeiträge

9 Membership fees
9 Certification of resolutions (recording of minutes) § Protokollierung

9 Formation of the board of directors


§ Vorstand

9 Convening the general assembly (when and how)


§ Mitgliederversammlung

If any of these components are missing, the registry court will


refuse registration. In addition, the statutes should contain a
section explaining to which other non-profit organisation the
association’s funds will go in the event of dissolution.

The name of the association


Vereinsregister

The name of the association must be clearly distin-


guishable from other associations in the registration
district. It must also not be misleading (e. g. mislead-
ing as to the nature and size of the association).

HOUSE OF RESOURCES 6 GUIDE TO FOUNDING AN ASSOCIATION


Note that registration does not lead to pro-
ZusammenKochen e.V. tection of the name. Violations of name and
1001 Köche e.V. trademark law may not only make it neces-
Kochclub
Kreuzberg e.V. sary to change the name at a later date, but
may also lead to considerable claims for
damages. Therefore, research thoroughly
whether the name is not already in use.

The board of directors

The board of directors manages the association and


concludes all legal transactions on its behalf. It must
consist of at least one person and is elected by the
general assembly.

The composition of the board of directors must be set

Vo
Vo

rs
rs

tan
tan

out in the statute. In most cases the board will consist


d
d

of one to five persons.

The statute must stipulate whether the board members


are authorised to represent the association individually
or jointly, i. e. whether they may conclude transactions
on behalf of the association. For example, it can be
stipulated that two out of three board members jointly
represent the association. Only two board members
can then conclude contracts for the association.

The statute should not provide for too many board


Vo
rs

members, because often there are not enough people


tan
d

to fill all the positions. Usually two board members


Vo
Vo

Vo
Vo

rs
rs

rs
rs

tan
tan

tan
tan

are sufficient.
d
d

d
d

HOUSE OF RESOURCES 7 GUIDE TO FOUNDING AN ASSOCIATION


The General Assembly

The general assembly makes all major decisions in the


Tagesordnung
association. These include, for example, the election of
the board, amendments to the statute or the discharge
of the board. When and how often the general assembly
takes place can be regulated in the statute. Otherwise,
the board of directors decides. It invites members to
the meeting and draws up an agenda.

The agenda is important in the invitation. Effective


resolutions can only be passed on items on the
agenda specified in the invitation (unless the
statute provide otherwise).

Non-profit status

Associations are not already non-profit-making by virtue


of their registration in the ‘register of associations’. It
also has nothing to do with the registration of the asso-
Finanzamt ciation. Non-profit status (more precisely: tax relief) is
a tax matter. It is granted and certified by the tax office
Verein
upon application.
steuer-
begünstigt
Non-profit status has mainly tax advantages.
The most important are:

9 Some of the association‘s income remains


tax-exempt.

steuerfrei 9 The reduced VAT rate (7 % instead of 19 %)


applies to certain services.

9 The association can issue donation receipts.


The donations can then be deducted by the donor
7 % 19 % MwSt for tax purposes. This donation deduction increases
the motivation to donate and thus the donation
volume of the association.

HOUSE OF RESOURCES 8 GUIDE TO FOUNDING AN ASSOCIATION


Many grants are only awarded to non-profit
organisations.

However, there are a number of conditions attached


to non-profit status. This concerns above all:

9 restrictions on the use of funds


9 restrictions on economic activity
9 strict limitations on payments to members
9 extended accounting obligations
Satzung Verein
For this reason, it should be carefully examined Finanzamt
in advance whether non-profit status is really worth- steuer-
begünstigt
while for the association. It does not make sense
for every association.

An application for non-profit status must be submitted


to the relevant tax office. To do this, the association Non-profit status is
must submit its statute. If the requirements are met, indispensable if the
the tax office will first grant provisional exemption (for association wants to issue
donation receipts. Many
a maximum of 18 months). As proof, the association
funding subsidies are also
receives a notice of exemption. After the first tax return
only available to non-
has been submitted, the exemption is granted for three
profit organisations.
years in advance.

Associations and taxes

If an association is seeking non-profit status, it will have


Steuern keine Steuern
to deal with the tax office as soon as it is founded.

An association – like any business – becomes liable


to pay taxes when it generates corresponding income
or profits. Membership fees, donations and subsidies
SPENDEN
are tax-exempt.

HOUSE OF RESOURCES 9 GUIDE TO FOUNDING AN ASSOCIATION


However, most other income (e. g. from the sale of
food and drinks, admission fees, advertising reve-
nue, etc.) is generally taxable. §

The coexistence of income treated differently for


tax purposes makes the taxation (and thus also
the accounting) of non-profit associations quite
complicated – at least if the association has
different sources of income.

IMPORTANT: Donations
Associations must pay
close attention to their tax
obligations. The tax office Non-profit status is often applied for primarily so
can hold the board personally that the association can issue donation receipts.
liable if the association does However, it may only do so once it has received
not fulfil its obligations. a notice of exemption from the tax office.

The official sample text formulations must


be used for donation receipts. A distinction
is made between donations in cash and
Spenden-
donations in kind.
bescheinigu
ng

The association is liable for incorrectly issued


donation receipts and for the incorrect use of
donations. For this reason, the board should
€ work particularly carefully in this area.

HOUSE OF RESOURCES 10 GUIDE TO FOUNDING AN ASSOCIATION


What else you need to be aware of

In Germany, there are many legal regulations and


reporting requirements when an organisation engages
in economic activities. §
If income and surpluses are generated from economic §
activities, a business registration is usually required.
A restaurant licence is required for the sale of food
and drinks, especially alcohol. If music is performed or
played, notifications and payments to GEMA are due.
Gewerbeschein

If 50 % (or more) of the board members of the asso- Gaststättenerlaubnis


ciation are not EU citizens, the association must be
reported to the police as a foreigners’ association* GEMA
within 2 weeks after registration according to § 14
of the Associations Act.

Anyone founding an association should also inform


2
Wochen

themselves about these issues, because violations


can result in fines.

An association should also have association liability


Ausländerverein anmelden
insurance (Vereinshaftpflicht). It is advisable to seek
advice on this subject.

Many regulations for


businesses also apply to
associations. For example,
they must have a licence if
they regularly sell food and
* The term “foreigners’ association” is used in the drink or hold events. Often,
“Law on Associations” and is therefore also used here.
above all, a business
However, the House of Resources takes a critical view
of the term “foreigner” in this aspect because it basi-
registration is required.
cally locates people abroad and does not sound as if
someone’s centre of life is in Germany. However, there
are many people who have been living here for years or
even decades without a German or European passport.

HOUSE OF RESOURCES 11 GUIDE TO FOUNDING AN ASSOCIATION


Checklist for founding an association

9 Determine 7 founding members

9 Determine the name of the association

9 Write the statute of the association

9 Send statute to the tax office for (non-binding) preliminary examination


(processing time approx. 4–6 weeks)

Once the statute has been pre-examined by the tax office:

9 Hold founding meeting


Although no formal invitation is required for the formation meeting, this
meeting should be prepared in exactly the same way as future (obligatory)
annual general assemblies: Adhere to the invitation form and deadline, draw
up the minutes of the formation meeting, appoint a secretary, elect the board,
possibly elect other organs (all those specified in the statute), adopt and sign
the statute, draw up an attendance list of the founding members, draw up a list
of addresses of the board.

9 Notarisation of the signatures of the board by a notary

9 Apply to the Charlottenburg Local Court for registration of the association


(can be done by the notary)
Send following documents to the court: application for registration of the
association, statute of the association, minutes of formation meeting

After receiving the extract from the ‘register of associations’ from the Local Court:

9 Application to the tax office for recognition as a non-profit organisation


with the following documents: application for exemption from corporation tax,
statute of association, minutes of formation meeting, extract from the register,
list of addresses of the board of directors, form for questionnaire on tax
registration (processing time approx. 2–3 weeks)

9 after receipt of the exemption notice from the tax office


a free bank account can be opened, donations and subsidies may be accepted

9 Done J

HOUSE OF RESOURCES 12 GUIDE TO FOUNDING AN ASSOCIATION


Helpful links

9 Sample formation meeting minutes


https://www.bmjv.de/SharedDocs/Downloads/DE/Formulare/
Muster_eines_Gruendungsprotokolls.pdf?__blob=publicationFile&v=2

9 Sample statute of association


https://www.bmjv.de/SharedDocs/Downloads/DE/Service/Formulare/
Mustersatzung_eines_Vereins.html

9 Guide to association law


https://www.bmjv.de/SharedDocs/Publikationen/DE/Leitfaden_
Vereinsrecht.pdf?__blob=publicationFile&v=14

9 Info on registration at the local court


https://service.berlin.de/dienstleistung/326808/

9 Vereinsknowhow Verlags- und Service UG


www.vereinsknowhow.de

9 Questions and answers on taxes in associations


https://www.berlin.de/sen/finanzen/steuern/informationen-fuer-
steuerzahler-/faq-steuern/artikel.9064.php

9 Information on working in an association


https://www.buergergesellschaft.de/praxishilfen/arbeit-im-verein

HOUSE OF RESOURCES 13 GUIDE TO FOUNDING AN ASSOCIATION


GLOSSARY

e. V. and ‘register of associations’ status must be applied for at the tax office.
(Vereinsregister) If this is granted, the association receives
the so-called notice of exemption. Non-profit
e. V. means registered association. An
status has some advantages for associa-
association becomes a legal entity when it
tions such as tax concessions and the pos-
is entered in the register of associations at
sibility of collecting donations and applying
the competent local court. The association
for subsidies.
is then given the suffix e. V. and receives a
so-called extract from the ‘register of asso-
Fiscal Code (AO) (Abgabenordnung )
ciation’s and its own association register
number. The German Fiscal Code (AO) contains
important paragraphs on the subject of tax-
Corporate body and legal person ation of associations and non-profit status
(Körperschaft und juristische Person) for associations. Here, the law lists which
purposes may be considered non-profit.
An association belongs to the legal form
of a corporation. This is an association of
Notice of exemption (Freistellungsbescheid)
persons for a common purpose, which as a
legal person has its own legal capacity and This states that the association is exempt
is represented by association bodies. Asso- from corporation tax and is therefore a non-
ciation members are referred to as natural profit organisation. It certifies the exact pur-
persons, the association as an organisation pose (= which section(s) of the tax code) for
as a legal person. which the association is granted charitable
status. In the case of a new foundation, the
Non-profit status (Gemeinnützigkeit) certificate is valid (provisionally) for 3 years
from the date of issue. During this period,
Associations whose activities serve the
the first tax audit must be carried out, which
common good are designated as non-­profit-
may take 1 or 2 years. Thereafter, the review
making. The aims of the non-profit activity
period can be extended to 3 years if the
may include the promotion of education and
association does not operate a commercial
upbringing, art and culture, environmental
business. A notice of exemption, if issued,
protection, animal welfare and nature con-
is valid for 5 years from the date of issue. In
servation, the promotion of international
order to receive this notice, the association
attitudes, tolerance in all areas of culture
must then submit a corporation tax return
and the idea of international understanding,
together with a surplus calculation as well
or the promotion of youth and assistance for
as an activity report and a statement of
the elderly. The requirements (purposes) for
assets and liabilities to the tax office.
non-profit status are set out in §§ 51–68 of
the German Fiscal Code (AO). The non-profit

HOUSE OF RESOURCES 14 GUIDE TO FOUNDING AN ASSOCIATION


General Assembly (Mitgliederversammlung) Board of Directors (Vorstand)

The general assembly is the second compul- The board is elected at the formation
sory body, alongside the board of directors, meeting and then confirmed or re-elected
necessary for the existence and functioning annually by the general assembly. Like the
of an association. The general assembly is general assembly, the board is one of the
the structure of the association in which the mandatory organs of an association. With-
members make the fundamental decisions out a board, the association cannot act and
for the association. The formalities for the thus cannot exist. It represents the associ-
work of the general assembly, the condi- ation in and out of court and conducts the
tions for inviting members to the general association’s business; the BGB (German
assembly, the regulations for the agenda Civil Code) sees it in the position of a legal
and voting on it must be precisely regulated representative. In view of the importance
in the statute. of the board for the association, this area
should be comprehensively regulated in the
Statute (Satzung) statute, as the corresponding basic provi-
sions of the BGB are usually not sufficient.
An association that wants to be entered
This concerns both the election and the
in the ‘register of associations’ in order to
composition as well as the powers of
become a “e. V.” needs a written statute. The
representation of the board.
statute is therefore often referred to as the
“basic law” of the association. It is the task
of the association to draft the statute and
their content and to give itself a statute that
is suitable for the association. There, basic
provisions as well as the way in which the
association is to operate are laid down.

An association can formulate its own legal


basis for the rights and duties of its mem-
bers and for its organisational structure to a
large extent. The statute is the central legal
document.

HOUSE OF RESOURCES 15 GUIDE TO FOUNDING AN ASSOCIATION


Publisher

House of Resources Berlin


Marchlewskistraße 27
10243 Berlin

Tel (030) 23 98 93 91
Fax (030) 2 79 01 26
Mail kontakt@house-of-resources.berlin
www.house-of-resources.berlin
www.facebook.com/HoRBerlin

Authorship

Wolfgang Pfeffer (expert in association law, founder and


operator of the website www.vereinsknowhow.de)

Team from the House of Resources Berlin

Layout: Cornelia Agel, sevenminds.de

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