The main differences between an association and a foundation.
* Liability , Liability and Control
An association has members. In the General Members' Meeting, these form the highest power within the association. The board members are elected by them. Each year, the board accounts for its policy to the General Members' Meeting in an annual report. In addition, the General Members' Meeting must approve the financial report.
There are three types of associations:
- Founded by notarial deed and registered with the Chamber of Commerce;
- only registered with the Chamber of Commerce;
- neither registered nor incorporated.
An a-association has full legal capacity: such an association can inherit and own buildings and land. Moreover, the board members are not liable for the debts of the association.
A B-association has limited legal capacity. It cannot inherit, own buildings or land and the board members guarantee the association's debts.
A C-association has no legal capacity. That is, such an association cannot inherit and acquire buildings and land. The board members and all members who enter into an agreement on behalf of this association are jointly and severally liable.
In most cases, voluntary organizations opt for the a-association, because it offers the most guarantees.
The special thing about a foundation is that such an organization has no members. All other legal forms have members or shareholders who can steer the board to a greater or lesser extent. In a foundation, the board determines the policy, the purchases, the conclusion of agreements, etc. However, this does not mean that there is no form of control. Foundations often receive subsidies or funds from funds. The subsidy providers then naturally want to know whether the money is being spent in the right way. When granting the grant, it is also stipulated that the foundation must account for this at the end of the grant year. This is done in an annual report that has been approved by an accountant. If the board ignores the statutes or manages them poorly, the judge and/or the public prosecutor can also be involved.
* Establishment and finance
We limit ourselves to the A-association because such an association is the most common.
Before you go to the notary, you have to put a number of things on paper:
- The purpose and name of the association;
- the obligations of the members towards the association (for example the contribution);
- the appointment of the board members;
- the way in which all members are called together for a General Members' Meeting.
The civil-law notary processes this information in a deed. Then you register your association with the Chamber of Commerce. If you then open a bank account (in the name of the association), you can get started. The association may not distribute its profits among its members. They may, however, receive an expense allowance and attendance fee.
You can set up a foundation by will or 'normally'. In this document we only discuss the ordinary incorporation. Before you go to the notary, put the following on paper:
- The name and purpose of the foundation (the word 'foundation' must be part of the name);
- the way in which you will finance the activities of your foundation;
- how you want to name the board members.
The civil-law notary supplements this information with the legally required provisions and makes a deed thereof. With this deed you can register your foundation at the Chamber of Commerce and open a bank account (in the name of the foundation). You can declare the formation costs at the foundation.
A foundation may not make distributions to its founders, directors or others. Benefits that have an idealistic or social purpose are allowed. For example, think of funds, money for 17 natural disasters, etc.
Personnel costs, expense allowances and attendance fees are of course allowed.
Tips when choosing a legal form
- Do you want to develop joint activities or represent interests? Then the association is the best legal form;
- do you want to make money or facilities available to others? If you want to do that yourself, the foundation is the right choice;
- if you are going to own and/or manage buildings and/or land, it is best to opt for an A-association or foundation;
- does it concern major interests and/or risks? Then choose an A-association or foundation;
- do you want to protect the personal liability of board members? Then an A-association or foundation is the best option.
If an organization is going to develop commercial activities, it is increasingly opted for a combination of a foundation or association with a private limited company (BV). For example, a community center that operates the catering section through a BV or the ANWB that, as an association, has accommodated its commercial activities in a BV. There are also foundations and associations that run a business independently - so without a BV. It is beyond the scope of this document to go into this. We would like to give you one tip: be well informed in advance by the Chamber of Commerce, a civil-law notary and the Tax Authorities.