The association is regulated as a legal form in the German Civil Code (BGB). Sections 21 et seq. of the BGB represent the applicable law for associations. Usually, an association is entered in the register of associations and then receives the suffix e.V. which means "registered association". As such, it has legal capacity with its own rights and obligations. It can then conclude contracts in its own name etc.
A federation is typically a registered association as well. A federation must therefore observe the same rules and regulations as an ordinary association - both in legal terms and with regard to association taxation. However, the term "federation" indicates that it is an association that has reached a certain size and is active, for example, nationwide or state-wide.
In addition, members of federations are often associations themselves. For example, several regional associations can be members of a national federation. As a result, the legal structure of a federation is far more complex than that of an ordinary association. This also makes it more prone to errors, which usually leads to the fact that changes in the federation's organization can be converted only under substantial legal and communicative effort. As far as possible, the desired and optimal federation organization should therefore be carefully and farsightedly worked out during the founding stage already.
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Associations and federations exist in numerous variations. The majority of associations are charitable organizations which promote every conceivable charitable, benevolent and religious purpose in the sense of the tax code. For such charitable associations the German tax law provides for extensive tax privileges.
In addition, there are also many major non-charitable associations. Above all, professional organizations, trade organizations and industry organizations that promote the economic interests of their members and therefore cannot be charitable, hold an important position in the market. There are at least as many different associations/federations as there are different economic sectors. In fact, there is hardly a branch of industry that can afford not to be organized as a federation. These organizations exert enormous influence on public opinion and, as lobby representatives, they are in constant contact with politicians.
As far as their geographical scope of action is concerned, a distinction can be made between locally/regionally active clubs and associations and federations that operate state-wide, nationwide or even on a European or global scale. Associations or federations that operate beyond the borders of Germany, Europe-wide or internationally are subject to completely different legal requirements than locally active associations and federations.
Large associations and large federations are generally no longer run by volunteers but by full-time managers according to business management principles. These large associations and large federations, such as sports clubs or associations with professional departments and other business operations, professional organizations, trade organizations and industrial organizations, but also charitable federal or state associations, require professional legal and tax support.
The basis for a successful and risk-minimized day-to-day business are carefully drafted organizational documents like the association's statutes, its rules of procedure and other association regulations. Also, large federations and associations depend to a much greater extent than small associations on strategic advice on employment law. The same applies to questions of intellectual property rights, trademark law, competition law and antitrust law as well as banking and capital markets law and general tax law.
However, the most important prerequisite for the successful operation of a large association or federation is a suitable internal legal structure of the organization. For example, large associations oftentimes consider spinning off subsidiary corporations (e.g. LLC, nonprofit LLC) or even change its legal form from an association/federation to a limited liability company.
This is for good reason. Sometimes associations have outgrown the typical association structure over the years, both in terms of the number of members and the number of employees working for the association and the potential liability volume. Oftentimes,
block further development and present the association with considerable financial challenges.
Conversely, there are cases in which an overly complicated group structure is an obstacle and unnecessarily expensive.
This is why numerous associations in Germany have restructured themselves in recent years for legal, economic, tax and other practical reasons, particularly in the social sector (daycare centers and kindergartens, educational institutions, religious and welfare organizations and other social service providers).
Large associations/federations often also establish foundations. They usually serve marketing and fundraising purposes.
What does that mean in specific terms?
Your organization needs support? We look forward to hearing from you at +49 (0)69 76 75 77 80 or email@example.com.
In the daily activities of an association/federation, countless legal regulations have to be observed, which are laid down in the law of associations and federations, but also in numerous other legal fields. For example, if associations or federations aspire to achieve tax-exempt charitable status or are already recognized as a charitable organization, they are subject to the requirements of German nonprofit law and tax law in addition to association law. Similarly, trade organizations also enjoy certain tax privileges and have to comply with specific criteria.
There are also hidden liability risks, for example in antitrust law or employment law, especially in the case of legally flawed staff leasing. The larger an association or federation is, the greater the risks of liability for those involved.
In order to avoid having to defend yourself personally in court against claims for damages, appropriate precautions should be taken like designing your statutes in a way that even full-time employees only have to be liable for gross negligence and intent. Sometimes the courts even accept when association statutes exclude liability for gross negligence. A clever distribution of responsibilities, which is reflected in the statutes and bylaws, can also reduce liability risks considerably. Furthermore, taking out D&O insurance (directors & officers insurance) can help.
Tax issues play an important role in the day-to-day management of associations and federations - both for charitable associations and non-charitable trade organizations.
Typically, associations have to deal mainly with corporate income tax and VAT issues related to
We will be happy to take care of the ongoing bookkeeping of your association and filing of the required tax returns and annual financial statements, including all necessary negotiations with the tax authorities. Our attorneys for association law and our tax advisors experienced in the field of association and federation taxation will make sure that you are on the safe side as far as taxes are concerned.
In order to support you in setting up a German registered association, we prepared three different packages. We offer all of the following services in English or German.
Includes all services of the Basic Package, as well as:
Includes all services of the Basic Package and the Founder Package, as well as
No package fits your needs? Your case is so individual that we cannot provide optimal coverage with our package offers? We are as individual and flexible as you need us to be: Of course, you are more than welcome to book us at our usual hourly rates right from the start in order to book individual services. Just get in touch with us!
Since its inception, WINHELLER has been highly focused on the successful all-round consulting of all kinds of associations and federations. Our attorneys are here to support you in all legal matters related to the establishment of an association or federation and its ongoing day-to-day business. In addition to our legal advice, our nonprofit tax team takes care of all required bookkeeping, accounting and tax consulting work.
Your contact persons on the subject of association law and the law on federations are attorney Uwe Müller and attorney Johannes Fein (Certified Specialist for Tax Law). If you want to talk to a nonprofit tax advisor, Christine Pauly will be happy to assist. You can reach our attorneys and tax advisors by e-mail (firstname.lastname@example.org) or by telephone (+49 (0)69 76 75 77 80). Feel free to get in touch with us. We will be pleased to assist you with advice and support and to accompany you in all your charitable and non-charitable projects.