What are the consequences if a club engages in economic activities unlawfully?
April 18, 2022 | 60,00 EUR | answered by Siegfried Eckstein
Dear tax advisor,
I am the chairman of a non-profit organization and have recently learned that we may have engaged in economic activities improperly. I am very concerned about the consequences this could have for our organization.
Our organization was founded several years ago with the clear goal of pursuing charitable purposes and supporting society. We have raised donations, organized events, and carried out projects for disadvantaged people. However, we have also recently engaged in some economic activities to generate additional income. This includes selling merchandise and renting out space for private events.
Now I have learned that non-profit organizations are subject to strict rules regarding economic activities. I am worried that we may have violated these rules and that this could have serious consequences for our organization.
Therefore, I am seeking your advice: What are the consequences if an organization engages in economic activities improperly? What measures can we take to minimize potential damage and ensure that we act in compliance with legal regulations in the future?
Thank you in advance for your support.
Sincerely,
Johann Pohlmann
Dear Johann Pohlmann,
I understand your concerns and can appreciate that as the chairman of a non-profit organization, you are worried about inappropriate economic dealings. It is important for non-profit organizations to comply with legal regulations in order to maintain their status as non-profit and avoid any legal problems.
If a non-profit organization engages in inappropriate economic activities, this can have various consequences. Firstly, this can lead to the organization losing its status as non-profit. This means that the organization can no longer benefit from tax advantages such as exemption from corporate tax or the ability to issue donation receipts. Additionally, the organization may also be fined and face further legal consequences.
To minimize potential damages and ensure that your organization acts in accordance with legal regulations in the future, I recommend taking the following measures:
1. Review the past economic activities of your organization: Go through all the past economic activities of your organization and check if they comply with legal regulations. If you find that some activities are problematic, take measures to correct them.
2. Consult an expert: It can be helpful to consult a tax consultant or lawyer specializing in non-profit taxation and compliance. An expert can help you understand the legal requirements and take appropriate actions.
3. Train the board members: Ensure that all board members of your organization are informed about the legal requirements regarding economic activities. Train them to avoid future violations.
4. Consider alternative sources of income: If certain economic activities are problematic, consider alternative sources of income that comply with legal regulations. This could include organizing fundraising events or applying for grants.
Overall, it is important for you as the chairman of your organization to take proactive steps to avoid potential legal consequences. By implementing the above measures and seeking professional advice, you can ensure that your organization continues to operate in compliance with legal regulations and successfully pursue its non-profit goals.
I hope this information is helpful to you. If you have any further questions or need assistance, I am happy to help.
Best regards,
Siegfried Eckstein
