Can a club make a profit and how can it be used?
August 21, 2023 | 40,00 EUR | answered by Emilia Vöss
Dear lawyer specialized in club law,
I have a question regarding profit-making and the use of profits by clubs. My name is Ingo Kleine and I am a board member of a sports club. In recent years, we have successfully organized various events and projects that have generated positive financial results. Now, we are wondering whether a club is allowed to make profits and how these profits may be used.
Our club is recognized as a non-profit organization and exclusively pursues charitable purposes in the field of amateur sports. So far, we have invested all our earnings in supporting our members and organizing sports events. However, we are concerned that there may be legal restrictions that prohibit us from making profits or using them for certain purposes.
Our worry is that we may be in violation of legal regulations or our club's statutes if we do not use profits properly. Therefore, we would like to know from you whether a non-profit club is allowed to make profits at all, and if so, what provisions and regulations need to be followed. Additionally, we are interested in whether there are specific ways in which we can use profits effectively and lawfully to support the club's purpose.
We would greatly appreciate your support and expertise on this matter, as we as board members of the club are unsure how to proceed in this regard. Thank you in advance for your help.
Sincerely,
Ingo Kleine
Dear Mr. Kleine,
Thank you for your inquiry regarding profit generation and the use of profits by non-profit organizations in the field of association law. As a lawyer specializing in association law, I can help you and explain the relevant provisions and regulations to you.
In principle, a non-profit organization is allowed to generate profits. However, there are some important points to consider to ensure that the profits are used properly and do not violate any legal requirements or the organization's statutes.
According to § 55 AO (Tax Code), a non-profit organization may generate profits as long as these profits are used exclusively to fulfill the organization's statutory purpose. This means that the profits cannot be distributed to the members of the organization, but must be used to promote the organization's purpose. This may include financing sports events, supporting members, or purchasing sports equipment.
It is important that the organization handles its financial resources transparently and uses the profits for their intended purpose. This means that the use of profits should be specified in the organization's statutes and regular reports on the use of funds must be provided.
There are various ways in which a non-profit organization can use profits sensibly and legally. This includes forming reserves for future projects, financing training measures for members, or investing in the organization's infrastructure.
In conclusion, it is possible and even desirable for a non-profit organization to generate profits as long as these profits are used to fulfill the organization's purpose. It is important that the organization's board manages financial resources responsibly and ensures that profits are used in line with the organization's charitable purposes.
I hope that this information has been helpful to you and I am available for any further questions you may have.
Sincerely,
Emilia Vöss
