How can a club design its statutes to ensure nonprofit status?
April 28, 2022 | 50,00 EUR | answered by Siegfried Eckstein
Dear Mr./Ms. Krausmüller,
I am the chairman of a small sports club and we would like to maintain or obtain charitable status. We have heard that the constitution of a club plays a crucial role in being recognized as charitable. Unfortunately, we lack the necessary knowledge to draft our constitution accordingly.
Our current constitution was drafted by a lawyer several years ago and mainly includes regulations regarding membership, board elections, and dissolution of the club. However, we are unsure if this constitution is sufficient to meet the tax requirements for charitable status.
Our concern is that an inadequate constitution could lead to the loss of recognition as a charitable organization or even result in disadvantages in terms of club taxation. Therefore, we would like to know how we need to specifically structure our constitution to ensure charitable status.
Can you suggest any possible changes or additions to our constitution to ensure that we meet all tax requirements? Are there specific wording or clauses that should definitely be included in the constitution? We would appreciate any advice or guidance to keep our club on the right track.
Thank you in advance for your support.
Sincerely,
[Name of the chairman]
Dear Mrs. Krausmüller,
Thank you for your inquiry regarding the design of your association's statutes in order to obtain or maintain charitable status. It is true that the statutes of an association play a crucial role in being recognized as charitable. A flawed or inadequate statute can result in the denial of charitable status or even lead to tax disadvantages.
In your description, you mentioned that your current statute mainly covers regulations regarding membership, board elections, and dissolution of the association. While these topics are important, they alone are not sufficient to meet the tax requirements for charitable status. There are certain points that must be included in the statutes of a charitable association to ensure recognition.
Important points include the charitable purposes of the association, a precise description of charitable activities, the use of association funds exclusively for charitable purposes, the voluntary nature of the association's activities, members' rights and obligations, regulations for the dissolution of the association and the transfer of assets to another tax-exempt entity.
It is advisable to carefully review your statutes in light of these points and make any necessary adjustments or additions. It may be helpful to seek advice from an expert in association taxation to ensure that all tax requirements are met. A tax consultant with experience in association taxation can suggest possible changes or additions to your statutes and assist you in implementation.
It is important that your statutes are clearly and unambiguously formulated to avoid misunderstandings and secure recognition as a charitable association. By adapting your statutes in accordance with tax requirements, you can ensure that your association remains on the right path and retains charitable status.
I hope this information is helpful to you and I am available for further questions.
Sincerely,
Siegfried Eckstein
