How do I start a non-profit organization
Non-profit organizational forms
A guide provides information on non-profit organization forms and gives tips for tax exemptions for associations.
The Mercator Switzerland Foundation is committed to non-profit status. Therefore, it particularly supports projects of non-profit institutions or organizations and sponsorship models with a non-profit character. Often, actors come to the foundation with socially relevant projects who are only just beginning to position themselves as an organization. In the following documents you will find information about possible organizational and legal forms as well as assistance for the tax exemption of your non-profit association in the canton of Zurich.
Guide to possible forms of organization
The most important forms of organization for non-profit institutions are presented below.
Probably the easiest way to constitute yourself as a non-profit organization is to found an association and achieve the status of non-profit for it. Two people can do this. However, it is advisable to be at least three founding members, since with two people no majority decision is possible with regard to decisions or votes. It is important that you think carefully about the purpose and goals of your association before founding the association. If you have worked out a concept in this regard, nothing stands in the way of founding an association. Here you can find out exactly how an association is set up, what you have to consider and which formalities are necessary:
As a non-profit association, it is advisable to apply for a tax exemption from the cantonal tax authorities. The tax exemption gives the charitable nature of your activity an official character and for many charitable foundations as well as private donors it is an indispensable criterion whether they want to and are able to give money to an association or not. For a tax exemption, special requirements are placed on the statutes. Please note the comments in the sample statutes listed above.
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With the establishment of a foundation, assets are made independent for a specific purpose. According to the Swiss Code of Obligations, a foundation can either be created as a “legal transaction among the living”, i.e. during the lifetime of the builder, or as a disposition upon death. As a “legal transaction among the living”, the establishment of a foundation requires that it be publicly notarized. For this, a deed of foundation must be drawn up, which can be compared with the statutes of an association. An entry in the commercial register is then required - except for family and church foundations.
Other forms of organization
According to the Swiss Code of Obligations, a simple company is the amalgamation of two or more people by means of a contract to achieve a common purpose through joint forces and means (OR 530 ff). It is not a separate legal form and only appears externally in the form of a community of interests. A community of interests is therefore not a legal person and the establishment of a simple company does not require any special form. An entry in the commercial register is not possible, but a written contract, which is to be equated with the statutes of an association, is recommended. Most of the time, the simple society is just a preliminary structure or a temporary structure that either dissolves at a later point in time or is constituted in the form of a legal person.
The cooperative as well as the Sole proprietorship can have a charitable character, but are rather unsuitable for this, as they are actually intended as legal forms for companies with an economic purpose. It is possible to run a sole proprietorship or a cooperative with a non-profit character, but the process is demanding in this regard and not recommended for non-experts. Same goes for non-profit joint-stock companies (AG) or non-profit limited companies (GmbH).
A Working group Anyone can start a business. There are no legal regulations to be observed. If the working group pursues a charitable purpose or unites in order to achieve a charitable goal, it can be used as an organizational form for the implementation of a social project. Since the working group is not a legal form, a tax exemption is excluded.
It is also important to note here that in practice, associations and foundations in particular benefit from tax exemption due to non-profit status. The other legal forms can in principle have a charitable character and apply for a tax exemption, but here the requirements are much higher and an intensive examination is required.
For further information we recommend the book The Third Sector of Switzerland - Country Study on Johns Hopkins Comparative Nonprofit Sector Project by Bernd Helmig in collaboration with Hans Lichtsteiner and Markus Gmür as well as the relevant legal texts.
Guide to tax exemption for an association or foundation
IMPORTANT: The tax exemption is regulated individually in the individual cantons of Switzerland. Inquire about this at the cantonal tax authority of the canton in which your association is based according to the statutes. Most cantonal tax authorities have detailed instructions on how to obtain tax exemption on their website. The following information only applies to the tax exemption in the canton of Zurich.
In order for your association or foundation based in the canton of Zurich to be considered tax-exempt, you must submit the following documents to the tax authorities:
- Application letter: In the application letter you state your position on your association or foundation. They explain the purpose and the measures / activities with which you want to achieve this. You also state the date and place of foundation. Briefly comment on the extent to which your association or foundation has a charitable character. It is particularly important to note how you want to ensure that the remaining financial resources will continue to be used for a charitable purpose in the event of the dissolution of an association or foundation. Then briefly describe the enclosures and ask for a benevolent review of your application. Ideally, the application is signed by the association president or the founder or, if necessary, the financial officer of the board.
- Association statutes or foundation deed: The statutes or foundation deed must be signed with the place and date of the establishment of the association or foundation (founding meeting), usually by the association president or the founder. For a tax exemption, special requirements are placed on the statutes. Please note the comments in the model statutes.
- For associations - minutes of the founding meeting: The founding protocol provides information about the people present at the founding meeting as well as about the actual founding act. The founding members must be named. In addition, the founding protocol confirms the approval of the statutes by the founding members present, the election of the board of directors and, if necessary, names the auditor, if the association is obliged to audit. The minutes must be signed by the secretary and, if necessary, the president.
- Regulations: Regulations are further provisions which, in addition to the statutes or the foundation deed, determine the actions of the association or foundation. Not every association or every foundation has regulations, but if they do, these must also be sent as an attachment.
- Annual accounts: In principle, the annual accounts for the past three years should also be sent. If the association or the foundation has not existed that long, only the existing annual accounts have to be submitted.
- Annual report: In principle, the annual reports for the last three years should also be sent. If the association or the foundation has not been in existence for that long, only the existing annual reports have to be submitted.
This compilation is based on the following information:
Information sheet for tax exemption from the Canton of Zurich
Information sheet entry in the commercial register of the Canton of Zurich
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