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Association with or without profit: is it possible?

Associations are entities characterized by the absence of the purpose of profit. Let’s see together what it means and how to create your association, from the signing of the statute and the deed of incorporation to registration. Finally, let’s take a look at the costs of setting up and the applicable tax regimes.

Non-profit association

The non-profit association (translated into English ” no profit “) is a non-commercial entity made up of several people who pursue a common goal of an ideal, solidarity or social utility (eg cultural, philanthropic, sports, etc.)). All associations are necessarily non-profit. In fact, it is not possible to create a “profit-making” association to generate economic revenues.

On the basis of the aims pursued, different types of non-profit are distinguished. There are entities that are dedicated to solidarity with third parties (eg voluntary organizations, ONLUS) or others with purposes of social utility and activities aimed mainly at their members (eg cultural, sports, social promotion associations).

What does “non-profit” mean

The expression “non-profit” literally means that an association, as a non-commercial entity, cannot have as its main purpose the realization of a profit. In fact, the relevant legislation provides that the entity’s profits cannot be distributed to members (not even indirectly) and must be reinvested exclusively for institutional purposes.

The absence of the purpose of profit does not mean that the association cannot carry out “commercial” activities. In fact, the entity can generate revenues through its initiatives by selling products or services. These activities must always be secondary and instrumental to the achievement of the entity’s purpose. For example, a sports association can organize paid events or sell gadgets to raise funds in order to build a new camp for its members.

But then is it possible to set up a “for-profit” entity? Of course, but it will be necessary to set up a company, for example, an SRL or a SPA. The companies, in fact, are “commercial” entities through which it will be possible to carry out activities in order to make a personal gain.

with or without profit

How to open a non-profit association?

To found a non-profit association, you must first find other people who share the project. A minimum number of 3 or 7 members is required for the constitution, depending on the type of association chosen.

The procedure for setting up a non-profit entity is quite simple. In fact, it is sufficient to draw up the articles of association and deed of incorporation and proceed with further and possible obligations. Let’s see these steps in detail.

Statute and deed of incorporation

Statute and deed of incorporation of the association are the documents necessary to establish the body and contain the data of the members, the rules on the administration, and on the life of the non-profit organization.

To establish the non-profit, the signature of the founding members on the deed of incorporation and the statute is sufficient. In fact, the intervention of a notary is not necessary. This is foreseen only if you want to open a recognized association. With the recognition, the assets of the entity are separated from that of its directors who will not respond with their own assets for any debts of the non-profit. The recognition is not a compulsory act, however, may be necessary in some cases (eg. If you have a large organization if you want access to public funding, etc.).

Tax code, registration, and VAT number

The tax code for the association must be requested from the Revenue Agency. Without assigning the tax code, the entity cannot perform basic operations such as opening a current account, entering into contracts, etc. Furthermore, it is necessary to have the tax code to proceed with the registration of the association. This latter fulfillment is essential, for example, to access sector tax breaks.

The opening of the VAT number for an association is instead indispensable only when the entity habitually carries out commercial activity auxiliary to the main purposes and addressed to third parties external to the entity. It is not necessary to open a VAT number if the entity’s revenues are only those relating to institutional activities (membership fees and contributions from members) or if the commercial activity is only occasional (e.g. single annual paid event open to the public).

The balance sheet of a non-profit organization

Although the association is a non-profit organization, it is still required to draw up an annual budget (more properly called an accounting report). The document is generally more streamlined than that of the companies as there are few simplified items. It is important to distinguish in the document the proceeds deriving from the institutional activity from those of any commercial activity.

L ‘ any profit resulting from the balance sheet should be set aside and used by the body only for the conduct of its business. The prohibition of distribution is also envisaged in the event of termination of the non-profit. In fact, in this case, the members will have the obligation to donate the sums advanced to other associations.

mission report is also foreseen to be attached to the budget. This is a document prepared by the governing bodies of the entity that illustrates the activity carried out and its consistency with the statutory purposes. The budget and report must be approved by the assembly within four months of the end of the fiscal year.

Costs and tax regime

As regards the costs of an association, first of all, the fee of the professional (eg lawyer) must be considered for the preparation of the constitutive documents. The cost is even greater if you want to create a non-profit association recognized by a notary.

For the registration procedure, the costs are generally around € 300 between taxes and stamp duties. Then there are any management costs that the entity could incur to be considered. To give some examples: the rent of a property to have a registered office, the expenses for the organization of recurring events, etc.

Finally, from a fiscal point of view, non-profit associations today enjoy subsidized tax regimes. In the vast majority of cases, it is possible to adhere to the tax regime of law no. 398/91 which provides for the complete de-taxation of institutional revenues (eg membership fees, receipts for the participation of third parties in the activities of the body, etc.). Furthermore, in the case of commercial revenues, if these are less than € 400,000, VAT is not due and you are exempted from the obligation to invoice. This tax regime will be repealed with the full operation of the Third Sector Code which has reorganized all non-profit entities under the form of Third Sector Entities (ETS) and provides for new tax breaks.