Can a club make profits and keep them?
May 14, 2024 | 40,00 EUR | answered by Roberta Lahn
Dear lawyer specializing in association law,
I am Friedhelm Kieselbach and a member of a non-profit organization dedicated to environmental protection. Lately, we have been receiving increased income from donations and membership fees, exceeding our expenses. Now the question arises whether the association is allowed to make profits and whether we are allowed to keep them.
So far, we have used the surpluses to finance further environmental protection projects. However, I am concerned that there may be legal issues if the association makes profits and they are not used accordingly.
My main concern is that we are not familiar with association law and therefore unsure how to handle the profits generated. We certainly do not want to break any laws and want to ensure that our actions are in compliance with regulations.
Could you please explain to me if a non-profit organization is allowed to make profits and how they may be used? Are there possible solutions or advice you can give me to ensure that we act legally correctly?
Thank you in advance for your help and support.
Sincerely,
Friedhelm Kieselbach
Dear Mr. Kieselbach,
Thank you for your inquiry regarding profit generation and the use of surpluses in a non-profit organization dedicated to environmental protection. It is understandable that you are concerned about whether your organization is acting legally and how the profits generated can be used. I would like to explain in detail the regulations in association law and the options available to ensure that your organization is operating in compliance with legal requirements.
It is important to know that non-profit organizations are generally not allowed to make profits according to § 55 (1) No. 5 AO (Tax Code). This means that the income of the organization must be used exclusively for charitable, philanthropic, or religious purposes. If profits are made, they must also be used for the statutory purposes of the organization according to § 55 (1) No. 7 AO. It is not allowed to distribute profits or use them for private purposes.
In your case, where your organization generates surpluses through donations and membership fees, it is important that these funds are used solely for the promotion of environmental protection. You have already mentioned that the surpluses are used for financing further environmental projects, which is generally in compliance with legal requirements.
To ensure that your organization is acting legally, I recommend reviewing the statutes of your organization. The statutes should contain clear regulations on the use of surpluses and profits. If this is not the case, you may consider amending the statutes to clarify the use of surpluses.
Furthermore, it is advisable to keep the organization's finances transparent and to regularly create accountability reports. This way, you can ensure that the profits generated are properly used for charitable purposes and prevent any legal issues from arising.
In summary, non-profit organizations are generally not allowed to make profits, but surpluses can be used for the statutory purposes of the organization. By reviewing your statutes, maintaining transparent finances, and creating regular accountability reports, you can ensure that your organization is in compliance with legal requirements.
I hope that this information has been helpful to you, and I am available to answer any further questions you may have.
Best regards,
Roberta Lahn
