Can a club make a profit?
January 8, 2023 | 50,00 EUR | answered by Thomas Tressel
Dear lawyer specializing in association law,
I am Dora Lahn and a member of a non-profit organization dedicated to environmental protection. Lately, we have received an increase in donations and funding, so we are now considering how to effectively use these funds to further advance our projects. The question has arisen whether a non-profit organization is allowed to generate profits.
Currently, we have not generated any profits as all income is directly invested in the environmental projects. However, we would like to explore whether it would be advantageous for us as an organization to generate profits in order to ensure stable long-term financial resources for our projects.
I am concerned that we may be violating legal regulations if we were to generate profits as a non-profit organization. At the same time, I want to ensure that we comply with the legal framework and do not take any risks.
Could you please explain to me whether a non-profit organization is allowed to generate profits and what legal aspects need to be considered? What options are available for handling surpluses from donations and funding, and how can we ensure that we continue to be recognized as a non-profit organization?
Thank you in advance for your support and advice.
Sincerely,
Dora Lahn
Dear Mrs. Lahn,
Thank you for your inquiry regarding the possibility for non-profit organizations to generate profits and the associated legal aspects. As a lawyer specializing in association law, I am happy to help you with this.
In principle, non-profit organizations are allowed to generate profits. However, there are some important legal aspects to consider in order to continue to be recognized as a non-profit organization. Non-profit organizations must use their profits exclusively and directly for charitable purposes. This means that profits must not be distributed to members, but must be used for the charitable purposes outlined in the organization's statutes.
It is important that the intention to make a profit is not the main focus and that profits are not generated through economic activities that do not directly serve the charitable purpose. If a non-profit organization generates profits, these should primarily be used to advance and secure the projects and activities of the organization in the long term.
There are various ways in which a non-profit organization can handle surpluses from donations and grants. In addition to direct use for projects, profits can also be invested in reserves for future projects or in the creation of foundations or funds for charitable purposes.
To ensure that your organization continues to be recognized as a non-profit, it is important that you transparently document the profits and demonstrate how they are being used for charitable purposes. It is also advisable to regularly review and, if necessary, amend the statutes and organizational goals to ensure that all activities comply with legal requirements.
I hope that this information has been helpful to you. If you have any further questions or would like more detailed advice, I am at your disposal.
Best regards,
Thomas Tressel
Lawyer specializing in association law
