How to set up an association

The four steps to constituting it

1. Three people as a minimum, individuals or legal persons, with capacity to act and agreeing to constitute themselves.
2. The founding minutes: who you are, the will to constitute the association, the articles of association you approve and who makes up the first governing body.
3. The articles of association, which are what really has to be thought about. See below.
4. Registration in the relevant register of associations: the regional one if you are going to operate in one region, the Registro Nacional if in several.

Registration does not create the association — it exists from the minutes — but it is what gives it publicity as against third parties and what limits its members' liability. Without registration, they are the ones who are liable.

Then the NIF at Hacienda with form 036, provisional at first and then definitive once the registration is done.

The articles of association: the only thing that has to be thought through slowly

They get copied from a template, and that is where half the problems that arrive later begin. Four points where it is worth stopping:

• The purposes. They define what the association can and cannot do, and also which activities will count as its own activity for tax purposes. Neither so narrow that they tie you down, nor so vague that they say nothing.
• The fees. Having them set out in the articles of association matters: the VAT exemption in article 20.Uno.12.º of the VAT Act requires that what you charge your members be nothing other than the subscriptions set out there.
• The governing body. How many posts, how they are elected, how long they last. And that the posts are unpaid, if at any point you want to opt for the special tax regime.
• What happens on winding up. Where the remaining assets go. If you want the declaración de utilidad pública, they have to go to another non-profit entity.

The four documentary duties the law requires

Article 14 of the Ley Orgánica del Derecho de Asociación is short and clear. Every association, whether it has five members or five hundred, has to:

• Keeping an up-to-date list of members, with the joiners and the leavers and their dates. It is not a loose list: it is what proves who was entitled to vote at a general meeting.
• Recording in a minute book the meetings of its governing and representative bodies. It is the first thing an administration asks for before granting you funding.
• Keeping accounts that make it possible to obtain a true and fair view of the assets, the result and the financial position, and of the activities carried out as well. A book of ins and outs does not meet that.
• Drawing up an inventory of its assets. It is the one most often forgotten, and the one that is missed the day you have to account for where the equipment came from.

To which is added, if you have volunteers, the compulsory insurance for civil liability and accidents that the Volunteering Act requires.

What nobody expects: Corporation Tax

It is the first year's surprise, and it arrives late. An association is a Corporation Tax payer even without a profit motive. What exists is an exemption from filing the form, and it requires three conditions at once:

If a single one fails, form 200 has to be filed. It is set out on the associations page.

And on top of that, depending on what you do: the 111 if you have staff or pay professionals, the 115 if you rent premises, the 347 — which for a non-profit entity also reaches purchases of goods and services made outside any business activity, not only those of the activity — and the 182 if you receive donations.

And the declaración de utilidad pública?

It is neither automatic nor quick: you apply for it, it requires at least two years in operation fulfilling the purposes, and it brings additional accountability obligations with it.

In exchange it opens the door to the tax regime of Ley 49/2002, which is what really changes things: the entity pays 10% on the non-exempt part and, above all, your donors deduct 80% of the first €250 and 40% of the rest.

Translated: the first €250 a private individual donates you really cost them €50. It is the best argument an association has for asking, and you need utilidad pública to be able to use it.

What to get right from day one

• Really keeping the members' register, with joining and leaving dates. It is the first thing that gets lost when the committee changes.
• Collecting the fees by direct debit instead of chasing transfers. You need a mandate signed by each member and a SEPA file for the bank: it is in this other guide.
• Recording donations as they come in, with the donor's NIF. In January, reconstructing it from the bank statement is impossible.
• Allocating expenses to their grant from the start. Evidencing the spend is not hard; reconstructing a whole year is.
• And keeping the information in one place, not on the treasurer's computer. An association changes committee every two or three years.