Associations provide different benefits and opportunities as they continuously adapt to a changing business environment. But if there is one thing they share in common, it is the ability to offer a wide range of opportunities to others, which enables business success and builds meaningful relationships.
Are you interested to know how to start an association but still feel unprepared? Read on to learn the basic steps of forming it, understand its advantages, and gain in-depth knowledge of the differences between a corporation and incorporation.
Quick Reads
- What Is an Association?
- What Are the Differences Between Association Corporation and Incorporation?
- Business Associations vs. Nonprofit Associations
- What Are the Advantages of Starting an Association?
- Disadvantages of Being an Unincorporated Association
- Step by Step Guide to Starting Your Association
- Software to Automate and Run Your Association
- Top 5 Association Management Companies to Professionally Manage All Aspects of Your Association’s Operations
What Is an Association?
An association is any group of individuals who share the same purpose. They combine their skills and knowledge to commit and attain all their goals for the common good. In addition, an association typically follows a set of rules and membership requirements.
What Are the Differences Between Association Corporation and Incorporation?
If you are a business leader or an entrepreneur, it is imperative that you understand the difference between a corporation and incorporation. The two terms are closely related, but they have some unique differences.
A corporation is a body or authority formed to run an organization. It gives organizations liabilities on personal assets, especially on debts or other financial obligations. As a legal office, they are required to pay taxes while operating or making money. This entity is also required to have a corporate charter—a set of documents for incorporation to be filed in the State Corporate Office.
On the other hand, incorporation is the legal steps taken to register an organization as a corporation. It enjoys limited liability for its obligations, as it protects personal assets from debts. Incorporation needs to have some basic documents, but the rules and regulations differ from country to country depending on the region’s jurisdiction.
Below are the benefits of incorporating an organization:
- The transfer of ownership interests are easier
- A corporation can go beyond that of the founders
- Significant credibility boost to partners and to other organizations
- An association has easy access to financing and grants
- Low tax rates
As an association leader, you may choose to either use Corp. or Inc. extensions. Once you’ve registered an association, the selected extension should be applied to all legal matters.
Business Associations vs. Nonprofit Associations
There are key differences between organizations that identify themselves as “business associations” and “nonprofit associations.”
A business association is member-focused, and its primary duty is to provide services and benefits to members of a trade group, professional association, etc.
Its board member nomination and election usually happens during a large event, wherein each association member can vote for a new set of board of directors and board members.
While some associations are not obliged to pay their taxes, a professional association cannot be exempt and should abide by the Internal Revenue Code (IRC) Tax Designation 501(c) 4 or 501(c) 6.
On the other hand, a nonprofit association is typically a charitable institution that focuses on a mission to serve those in need. For most nonprofits, the election of officers and members is exclusive to the board.
Most educational, religious, and other charitable nonprofit organizations, which all have a desire to serve and improve the well-being of others, are IRS tax-exempt.
What Are the Advantages of Starting an Association?
Starting an association can be a meaningful experience for individuals interested in making a difference in the world. Running a successful organization requires a set of skills and thoughtful planning. Before you begin one, we will first show its benefits to help you decide if this opportunity is the right fit for you.
No need for registration. Unlike an incorporated business that follows a registration process, operating an unincorporated organization without registering it as an association is entirely legal.
Implementing rules and regulations is easy. As long as you set clear guidelines and regulations that adhere to some legal standards for members, setting rules shouldn’t be difficult.
Tax-exempt status. Internal Revenue Code section 501(c)(3) tax exemption offers numerous benefits to unincorporated associations like Federal income tax exemption, tax-deductible contributions, reduced postal rates, tax-exempting financing, among others.
Disadvantages of Being an Unincorporated Association
Now that you know why incorporating an association can give multiple benefits, now is the time to learn why remaining unincorporated can pose some disadvantages to a group.
No limited liability. Officers or members of the association can be held liable for the organization’s debts, contracts, and other obligations.
No separate legal existence. As a non-corporate legal body, there’s no separate legal existence of individual members. It can neither sue nor be sued other than through its officers and members.
Cannot create formal contracts. A contract that has been entered under the association’s name could be null and void.
Step by Step Guide to Starting Your Association
If you now feel more than inspired to build an association as a way to give back to your community, it’s essential to know the essential steps involved in the process first before you move forward.
Step 1: Plan
Planning provides a vision for the association, which includes goals essential to turn ideas into reality. While this may pose too much of a challenge, strategic association planning helps you identify the actual steps to take for maximum success.
Create an Effective Mission Statement
A well-crafted mission statement focuses on the association's people and common purpose. It's an essential supporting structure that sets the organization apart from the competition with its meaningful vision to succeed. The mission statement gives a better picture of who the group is and what it aims to achieve.
How to Write a Winning Business Plan
Keep your business plan short and concise. As you write it with other association members in mind, remember that they have little time to read the entire document.
By making the document brief but comprehensive, the faster you get to the point. In this way, the readers will quickly understand the ideas even by skimming or scanning.
It's crucial to convey the message to the readers in the most precise way. Therefore, you have to know your audience. Your business plan should use the language they understand. It’s also necessary that you avoid jargon, which can leave them guessing or confused.
Before planning, create a one-page pitch that can help test the association's viability before its launch. Performing this step can test the different elements to consider in your organization and obtain necessary feedback as you move forward.
Lastly, establish realistic long-term goals and objectives. Knowing what you're trying to accomplish and making an effort to turn them into reality lets you develop a business plan explicitly aligned to your goals.
Step 2: Build
Decide on how you want the association to be perceived. When your members have attended your conferences and events, how do you want them to feel about the experience?
For this reason, you have to build and organize an association based on your objectives. As a leader, you should communicate clearly and effectively to engage and motivate members while working steadily toward achieving goals.
Develop Your Board
Building association board is challenging and getting it right is crucial to take the organization to the next level and meet the long-term needs for success.
Prioritizing board development helps board members work together and make decisions based on a more strategic perspective. Therefore, it’s important to orient, train, and evaluate every board member to ensure long-term success.
Doing this signals that your organization places high value on membership development. It will also encourage others to adapt to the changing industry in a vibrant learning environment.
Board Member Recruitment Process
As you start recruiting for nonprofit board members, you should already be aware of the qualities and skills you are looking for. Before you post board member openings, keep in mind that you need to write clear and descriptive job titles.
If your goal is to find the best fit for your nonprofit board, be open to reaching out to potential candidates, whether offline or online. We advise that you post your openings on LinkedIn to access a vibrant community that brings the skills and talents of different individuals altogether.
Create a systematized recruitment process for evaluating, interviewing, and selecting qualified applicants. You can invite them to any of your association events or ask them to volunteer in any of your projects to get to know them better.
Don’t be rushed into making a decision. Shortlist candidates first and be open to asking for suggestions from others. Narrow down the applications to 2-3, and prepare to present them to your board for further discussion.
Who to Recruit for a High-Impact Board
Association board members need to have the right skills and passion for achieving organizational goals. Thus, recruiting potential candidates to build a high-impact board requires thoughtful planning. Let’s look at some of the factors to remember to help you find the right ones.
Choose board members that are well-known and respected in the community. They can be doctors, lawyers, bankers, or other professionals with social connections.
Being respectable community members, you have to make sure that they are open to having their names associated with the organization.
In addition, they should be willing to attend and represent the association in specific corporate events or other public functions. They should also be open to working with the press or performing other public relations duties.
1. Develop an Effective Job Description
Solid job descriptions can ensure that applicants understand exactly what their duties and responsibilities will be. The clarity in a job description puts potential board members on the same page as you and aligns them with your association goals. This will help you attract qualified candidates.
A board member’s job description should include position, function, duties & responsibilities, among others. However, not all board members will have the same job description.
Engage readers by starting with a concise but impactful job overview. A 5-sentence overview should contain:
- The job's primary function
- Its value to the organization
- Ways that it can contribute to the overall success
For example, it should answer the question, "How does this role contribute to ensuring that organizational policies and an effective management team are in place?"
An optimistic and supportive tone like, "Come and join a committed and innovative group of _____" to encourage individuals to apply.
Clearly state and describe the key job functions in a bullet list. You also can group them into categories like management skills, communication skills, and technical skills.
If you want to boost excitement, explain how the role can support business objectives, the advancement opportunity for the candidates, and the many ways your association makes an impact on the world today.
Moreover, write engaging and exciting job descriptions and use them as a tool in developing employer branding, offering a great candidate experience, and attracting top talents.
2. Surefire Ways to Find Qualified Candidates
Finding the right board member candidates with the help of technology and modern sourcing techniques can save you time and money. However, this doesn’t discount the fact that it’s still common practice to source them in a traditional way. Let’s explore below the different options for recruitment.
Referrals from friends and colleagues. Including personal referrals as part of the overall recruitment strategy can save you time and money. A study reveals that referred candidates are 55% more likely to be hired than applicants sourced through online job portals.
Recruitment agencies. Reach out to recruiters or headhunters of a staffing agency and ask for applicant credential evaluation or help you prescreen them.
Online job portals. You can advertise open positions on Indeed, CareerBuilder, or Monster and even have a look at some CVs of potential candidates. On the other hand, interested applicants can also access your organization’s details and vacancies using these job search websites.
Social networking websites. LinkedIn is a networking tool that allows you to search for qualified candidates and expand your professional network.
3. Finding and Selecting Your Board Members
Before interviewing applicants, develop a standard set of questions first that can help you learn more about their credentials and experiences.
To help you out, Dale E. Jones, President & CEO at Diversified Search shared the 5 key questions to ask prospective board members:
- Why do you think you are a good fit for this board?
- Do you have any conflicts of interest?
- Are you prepared for the time commitment?
- Do you understand the culture of this organization?
- Can you spy and manage disruption?
Once you’ve chosen the right board members for your association, ask them to sign a contract to officiate their roles. LISC has released a sample Board Member Agreement you can use as a reference to gain clarity in business relationships and rights of parties.
Step 3: Fundraising
Fundraising is the process of gathering and soliciting voluntary donations from organizations, individuals, government, etc., in the form of money or other resources.
How to Request for Charitable Donations
In a research, 96% of respondents revealed they felt their moral duty to use what they had to help others when they donated. When asking for donations, explain to prospective donors that sharing what they have with others can benefit their causes and strengthen their values.
If you want to write compelling fundraising stories, learn what motivates your readers and can evoke emotions. Be honest in telling your story in a way that will reassure and inspire those who are looking to help. Also, build a fundraiser page that they can visit to get more information.
Step 4: Incorporation
Incorporated associations follow a legal structure governed by a state or territory law that is usually not-for-profit.
Generally, they consist of a minimum number of members that a committee manages. They meet yearly at an annual general meeting. Moreover, they have a set of rules and operate in the state or territory they are incorporated in.
Ways to Becoming an Incorporated Association
According to The National Council of Nonprofits (Council of Nonprofits), state laws and regulations for the formation of nonprofit corporations will differ from state to state. If you need state-specific resources, they recommend that you connect with your local state association of nonprofits.
Additionally, it’s best to consult legal counsel or CPAs to ensure that you understand and follow the right process for starting your association.
Below are the steps posted on the Council of Nonprofits website, which you need to follow when incorporating an organization:
File Articles of Incorporation (called a "certificate of incorporation" in some states.) Some states require supplemental information, such as:
- Certificate of Disclosure
- Proof of Corporate Name
- Filing fees - Be sure to follow the instructions on the forms and pay all applicable filing fees.
Extra steps, depending on the state:
In many states you must publish your articles of incorporation a certain number of times in a local newspaper, then file proof of publication with a state agency.
Samples to consider:
- Prepare and adopt by law
- Prepare and adopt a conflict of interests policy
- Prepare and adopt compensation policies
Step 5: Tax Exemption
Tax-exempt status gives you many advantages such as not being required to pay taxes, participation in grant programs, eligibility for deductible contributions, etc.
How to File for 501(C)(3) Tax-Exempt Status
Visit the Internal Revenue Service (IRS) and apply for Recognition of Exemption. Depending on the application method, you’re normally required to pay a user fee of $275 or $600 for your tax-exempt status. The IRS may ask you to wait for 3-12 months before they release the decision.
Step 6: Compliance
Associations that undergo a compliance check must file their tax requirements and obligations through the IRS.
Adhering to and Maintaining IRS Compliance
An incorporated association has to follow certain steps every year to keep its tax-exempt status. Begin by filling out and submitting IRS Form 990, which contains expenses, revenue, board members, achievements, and other operational information. However, the type of form to fill out will still depend on your gross receipts.
If you are planning to host a fundraising activity or ask for donations in the future, make sure to complete the Charitable Solicitation Registration first.
It’s important to fill out Form 990 every year. If your association is committed to following compliance regulations at all times, there’ll be no problem maintaining its tax-exempt status.
Once you’ve completed and submitted all requirements for the formation of your nonprofit, you can now start to set up your office.
Software to Automate and Run Your Association
Selecting the best association management software for your association is vital if you want better membership management and enhanced communication in your organization.
Glue Up
Glue Up’s Association Management Software is an all-in-one engagement software for associations to streamline membership processes and boost engagement. With this solution, you can automate membership management, which can help save time as you focus on growing your association.
It also includes the Membership Management Software—ideal for maximizing retention or increasing renewal rates with automatic reminders, auto-generated invoices, and unlimited membership types for the management of membership within associations and other member-based organizations.
Top 5 Association Management Companies to Professionally Manage All Aspects of Your Association’s Operations
Do you want your association to increase its value and continuously thrive? We came up with a list of association management companies that offer strategic guidance and management solutions to keep organizational operations running smoothly.
1. AMC Institute
AMC Institute (AMC) offers expert support and resources that help new organizations grow and thrive through industry best practices and educational/professional networking opportunities.
2. ASAE
ASAE is a membership organization that is now the premier source of learning, knowledge, and future-oriented research for associations. It provides different organizations with the resources, education, ideas, and advocacy to help them succeed in the years to come.
3. SmithBucklin
SmithBucklin is an association management company that assists organizations in managing all aspects of their operations like membership recruitment, financial management, government relations, among others.
4. Association Management Strategies
Association Management Strategies (AMS) is composed of a team of specialists and professionals that offer associations access to a full range of professional services required to smoothly operate.
5. SBI
SBI Association Management is a forward-thinking company in the Pacific Northwest ideal for nonprofit professional associations in need of innovative management services.
