Legal Bodies: What’s the Difference Between an Association and a Foundation?

The precise way in which to set up associations or foundations varies from country to country, but the basic differences between the two entities remains the same. Recognizing the differences between the two will help establish which category an organization falls under.

Member by Association?

First and foremost, both entities have a specified purpose that aligns their functions and goals while giving them legal rights. One of the main differences between a foundation and an association is the presence of members. An association is a group of people who join together and ‘associate’ with one another for a specific purpose, with members holding general meetings to discuss topics of interest. An association with full legal rights is a stand-alone entity bound by stricter regulations, while associations with limited legal rights can hold a board member personally liable for failure or debt. Upon registration, an association must record the name and place of where it was established, the obligations of its members, the way a general meeting is called, appointing and relieving board members, and the allocation of any surplus, in the case of dissolution.

The Profit Principle

Both associations and foundations are recognized legal forms that are not allowed to make a profit or pursue profit-making activities. This keeps them ‘non-profit’ in nature. Even though foundations are usually set up for collective purposes (which allows people to make donations or pay out these collected donations to a beneficiary), these are not ‘profit-making activities.’ In fact, foundations are usually charitable in nature (though there are distinctions in certain countries between private and public foundations). The issue of liability always comes up with any legal entity so both associations and foundations must register with their Chamber of Commerce.

Think of both foundations and associations as ‘teams’ or agencies that need a way to remain accountable to their ‘clients.’ Sometimes, this means that they will allow audits of their financial activities and release them to members and those who donate. According to legal experts, both associations and foundations require clauses that outline how an amendment can be made and how to dissolve the entity, among other things.