Starting an as­so­ci­a­tion: How it works

Whether a sports club, teachers’ as­so­ci­a­tion, or nature con­ser­va­tion club - very different purposes and goals can lead to the foun­da­tion of an as­so­ci­a­tion or club. But are there re­quire­ments for forming an as­so­ci­a­tion? What about in­cor­po­rat­ed or un­in­cor­po­rat­ed as­so­ci­a­tions? What is the exact de­f­i­n­i­tion of an as­so­ci­a­tion? Are voluntary as­so­ci­a­tions and clubs the same thing? These questions are some that you’ll need to look into if you want to start your own or­ga­ni­za­tion. There are good reasons for the pop­u­lar­i­ty of as­so­ci­a­tions: They offer their members a reliable, de­mo­c­ra­t­ic or­ga­ni­za­tion, relieve the in­di­vid­ual members and the board of the con­trac­tu­al liability and are com­par­a­tive­ly simple and cost-saving to start.

Starting a sporting, cultural, social, or char­i­ta­ble as­so­ci­a­tion can be hugely rewarding, but it also comes with its chal­lenges. You’ll want to consider whether the foun­da­tion of a reg­is­tered as­so­ci­a­tion is the best choice. Or have you already made up your mind and would now like to know what the pre­req­ui­sites are, what steps are necessary and what costs you have to expect when founding a club? Find out every­thing you need to know about founding an as­so­ci­a­tion here.

According to en­cy­lo­pe­dia.com, an as­so­ci­a­tion can be defined as: “a group organized for the pursuit of one interest or of several interests in common. As­so­ci­a­tions are usually con­trast­ed with in­vol­un­tary groupings serving a greater variety of ends, such as kin groups, castes, social classes, and com­mu­ni­ties.” This shows the history of an as­so­ci­a­tion: before even being part of a legal system, as­so­ci­a­tions were an integral part of society, showing in­di­vid­u­als’ col­lec­tive interest in a topic, or their con­nec­tion to one another. This article will not focus on the an­thro­po­log­i­cal and so­ci­o­log­i­cal origins of as­so­ci­a­tions, and instead look at them in a business context. It is good to know, however, that as­so­ci­a­tions have been part of our society for years, long before they were in­sti­tu­tion­al­ized.

Nowadays, however, an un­in­cor­po­rat­ed as­so­ci­a­tion is still a group of in­di­vid­u­als who gather for a certain purpose. This can be quite varied, but the im­por­tance is that there is a par­tic­u­lar goal or mo­ti­va­tion behind the gathering; a group cannot just be an as­so­ci­a­tion if there isn’t a clear link between them. In the USA, an as­so­ci­a­tion is also sometimes called a voluntary or­ga­ni­za­tion, or un­in­cor­po­rat­ed as­so­ci­a­tion. We will look at the dif­fer­ence between an in­cor­po­rat­ed or­ga­ni­za­tion and an un­in­cor­po­rat­ed as­so­ci­a­tion below, as it may influence which form your business takes.

The legal structure of your business is important. It in­flu­ences things such as how you employ people and taxes so it is important to get it right. LLCs and cor­po­ra­tions are in­cor­po­rat­ed busi­ness­es and are for-profit. This means that the profits a business makes will go to the share­hold­ers and investors of the business, rather than back into the or­ga­ni­za­tion itself. Sole pro­pri­etor­ships and part­ner­ships are un­in­cor­po­rat­ed busi­ness­es for profit; but not as­so­ci­a­tions. In most states, un­in­cor­po­rat­ed as­so­ci­a­tions do not have to register with their state, whereas un­in­cor­po­rat­ed busi­ness­es do have to. Fur­ther­more, an un­in­cor­po­rat­ed as­so­ci­a­tion is not seen as an in­de­pen­dent entity. Instead of this, an un­in­cor­po­rat­ed as­so­ci­a­tion works like a part­ner­ship, but is not one, due to its non-profit status.

When profits cycle back into an or­ga­ni­za­tion directly, this is known as a non-profit or­ga­ni­za­tion. The non-profit will use any money it has made to increase the reach and influence of the business, to further the goal or mission of it. This is also why it is important that your as­so­ci­a­tion has a clear purpose; without a clear purpose it may be difficult to justify non-profit status. This status as a non-profit business is a somewhat touchy subject in the US at the moment, and for good reason; non-profits receive tax exempt status from the government, which is clearly hugely ben­e­fi­cial to the business. An un­in­cor­po­rat­ed as­so­ci­a­tion is not rec­og­nized as a ‘legal entity’ under US law, which is different to an in­cor­po­rat­ed or­ga­ni­za­tion. The un­in­cor­po­rat­ed or­ga­ni­za­tion doesn’t have legal rights, and is not a separate entity to the members which make it up. This is why members must hold the finances and property, for example, of an un­in­cor­po­rat­ed as­so­ci­a­tion, because it in itself isn’t a legal entity, and cannot do these things.

An un­in­cor­po­rat­ed as­so­ci­a­tion is a non-profit or­ga­ni­za­tion, and an as­so­ci­a­tion is just that: A not-for-profit, un­in­cor­po­rat­ed as­so­ci­a­tion. But does your business fulfil the re­quire­ments to be one? And does it make sense to choose an as­so­ci­a­tion as your business’ legal structure?

As mentioned in the previous section, one of the benefits of being an un­in­cor­po­rat­ed as­so­ci­a­tion is that you are able to make use of a tax-exempt status within the US. This is helpful for as­so­ci­a­tions which are just starting out, because it minimizes the amount of book­keep­ing that is required.

Fur­ther­more, you are not obligated to register with any gov­ern­ment de­part­ments because an un­in­cor­po­rat­ed as­so­ci­a­tion will not be bound by reg­u­la­tions. This makes sense when you think about it: starting an as­so­ci­a­tion is different to starting an in­cor­po­rat­ed business, because they have different aims, you don’t have to register your business because tech­ni­cal­ly, it isn’t one.

One final benefit is that you are in some way much more flexible as an un­in­cor­po­rat­ed as­so­ci­a­tion. As long as they are ef­fort­less­ly up­date­able, and of course lawful, the reg­u­la­tions of an un­in­cor­po­rat­ed as­so­ci­a­tion can be freely chosen. As mentioned before, although these rules can be whatever you want them to be, your con­sti­tu­tion may be required to have certain clauses, phrased in a certain way.

Generally speaking, therefore, the ad­van­tages of being an as­so­ci­a­tion can be cat­e­go­rized as the benefits of flex­i­bil­i­ty and sim­plic­i­ty, which allow for greater freedom. Not being bound by as many reg­u­la­tions, you’ll have more time to focus on what matters, and you can save money on ac­coun­tants and taxes, for example.

Sadly, not all aspects of being an as­so­ci­a­tion are a bed of roses. There are certain dis­ad­van­tages to the legal status of being an as­so­ci­a­tion. One par­tic­u­lar dis­ad­van­tage is due to the very essence of being un­in­cor­po­rat­ed, which is that the as­so­ci­a­tion doesn’t represent a separate legal entity. This means that the as­so­ci­a­tion is not legally distinct from its members, so the committee members them­selves have to hold assets or enter into contracts for the as­so­ci­a­tion. For example, if there is a swimming team which has reg­is­tered as an as­so­ci­a­tion and rented a swimming pool, and for some reason there is a breach in the rental contract, the claims made would be against the in­di­vid­ual members of the committee.

Another issue of being un­in­cor­po­rat­ed is the matter of trans­fer­ring assets. Because the as­so­ci­a­tion itself is not a legal entity, it cannot hold property. Any assets that the as­so­ci­a­tion has will be held by the members of it, and once a person leaves the as­so­ci­a­tion there is the matter of trans­fer­ring these assets to another in­di­vid­ual. This could be com­pli­cat­ed, if, for example, someone leaves on bad terms. Good advice to prevent this is to maintain good com­mu­ni­ca­tion in the workplace.

If these dis­ad­van­tages turn you off starting an as­so­ci­a­tion, it is worth bearing in mind that you can always start out as an un­in­cor­po­rat­ed as­so­ci­a­tion and in­cor­po­rate further down the line. That way you can monitor how long you are truly taking advantage of the benefits of being an as­so­ci­a­tion, but as soon as the drawbacks outweigh these benefits, you can consider in­cor­po­rat­ing. This will most likely save you money in the beginning.

There are lots of things to consider when starting an as­so­ci­a­tion, but two of the most important things are how the man­age­ment will be struc­tured, and how you want to draw up the mem­ber­ship rules.

For most clubs, it is im­prac­ti­cal for every member to have a vote on every decision. Therefore, a man­age­ment committee is usually elected to run the or­ga­ni­za­tion on behalf of the members. The authority of this man­age­ment committee should be written into the rules of the as­so­ci­a­tion, and because every member has agreed to those rules when they sign up as a member, the structure of man­age­ment is fairly simple. The committee should be voted in, so that even though members agree to follow the rules by signing up, they still have some authority them­selves because they can decide who rep­re­sents them. That leaves the committee as rep­re­sen­ta­tives for all the members.

It is important when starting an as­so­ci­a­tion to consider how the committee will be appointed, what duties, authority and re­spon­si­bil­i­ties the man­age­ment committee will have, and under what cir­cum­stances their positions end. You should write these into the rules of your as­so­ci­a­tion.

When starting an as­so­ci­a­tion, you will no doubt want to attract members to join your worthy cause. You should, however, consider the criteria or el­i­gi­bil­i­ty for becoming a member, how a person becomes a member and im­por­tant­ly, how and under which cir­cum­stances mem­ber­ship ends. This should be con­sid­ered right from the beginning. You may consider giving committee members the power to end the mem­ber­ship of those who behave in ways which are in­con­gru­ent with the rules and/or values of your or­ga­ni­za­tion.

All living things change, and you’ll want to make sure that your or­ga­ni­za­tion is vibrant and lively. For that reason, you might need to have a process by which you or the committee can amend the rules. It might also be the case that over time the members them­selves may see fit that the rules change, or that the or­ga­ni­za­tion’s purpose is amended. Change is a good thing, but it needs to be carried out with caution and respect.

An annual general meeting might be a good idea, not just for morale and community spirit of the group, but also to give your as­so­ci­a­tion the time to make important decisions. Meeting in person is always prefer­able, but it is also possible to have more frequent gath­er­ings with all members thanks to online meeting software such as Skype or Zoom. These are an option where meeting in person is not.

Starting an as­so­ci­a­tion will most likely feel like setting up a business. For this reason, coming up with a sound business plan is a good idea, even if the or­ga­ni­za­tion itself won’t function like an in­cor­po­rat­ed as­so­ci­a­tion. A business plan will put you on the right track and help maintain pro­fes­sion­al­ism in the early days. We often speak of ‘forming an as­so­ci­a­tion’, but it should have become clear that you don’t really need to form an un­in­cor­po­rat­ed as­so­ci­a­tion – truly forming one would change its structure into an in­cor­po­rat­ed as­so­ci­a­tion and that is another matter entirely. What is necessary to start an as­so­ci­a­tion is what we have outlined above: man­age­ment rules and man­age­ment selection. You decide on the formal im­ple­men­ta­tion of these rules, but it’s worth starting off with a good foun­da­tion, and official documents can save you hassle down the line.

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