Starting From Scratch

I recently received a call from someone interested in starting a new association related to the industry in which he works. Although there are a couple of associations related to his field, they do not offer great member benefits so he would like to fill the void and offer substantial benefits and offerings to its members.  Through my own experience and after doing a bit of research, I’ve compiled the following outline on how to start a new association.

Associations are formed in order for industry partners to reach a common goal whether for legislative, educational and/or social reasons.  Since two heads are better than one, associations are a great way for a group of people to reach bigger goals that in turn will impact their personal businesses. If you would like assistance with forming an association or have questions about a step below, please feel free to fill out our contact form, or call 888-525-8810.

In order to fully understand what is involved with starting an association from scratch, you must first answer the following questions:

1)     Who will serve as the first Board Members?

    1. Select an odd number of people for voting purposes
    2. If possible, choose people who are recognized in the industry
    3. Make sure the group represents different areas of the industry
    4. Select people who have the time (and in some cases, the money) to give to the new association

2)     What is the Purpose and Name of the Association?

    1. Together with the new board members, determine the purpose of the new association,
    2. Decide on a name for the new association

3)     What is the Mission Statement?

    1. Use the purpose of the new association as the starting point
    2. Incorporate member benefits into the statement
    3. Should create the vision of the association
    4. Should be one to two sentences in length
    5. Should be a broad statement to allow for change throughout the years

4)     Who is being targeted for Membership?

    1. Determine the number of people and/or companies that could be potential members
    2. Find their contact information for mailing purposes

5)     What other associations in the industry exist?

    1. Find out what member benefits are offered
    2. Find out the amount of their annual dues
    3. If possible, find out if their members are satisfied

6)      Should the association be Incorporated or not?

    1. Most associations choose to be incorporated
    2. Most states require incorporated non-profits to hold an annual meeting and take minutes, as well as follow other guidelines
    3. Highly recommended to consult an attorney regarding incorporation
    4. Once determined, file the association with the Secretary of State’s Office

7)      What Tax-Exempt Status should be chosen for the Association?

    1. 501(c)(6) organizations are exempt from federal income tax; includes business leagues that engage in activities to promote the common business interest of members and to improve conditions of business; and allows lobbying and other legislation activities
    2. 501(c)(3) organizations are exempt from federal income tax; may be exempt from other state and local taxes; includes scientific or educational groups and are treated like charities or schools; and allows for the dues to be tax-deductible charitable contributions
    3. Highly recommended to consult an attorney regarding tax-exempt status

8)      What are the Income and Expenses?

    1. Membership Dues – Whether there will be one set cost for all members or different options based on income, size of business, individual vs. company, etc., the dues structure needs to be reflective of the industry
    2. Non-Dues Income – This could include sponsorships, grants, registration fees, partnerships with industry partners, contributions from Board Members, etc. and is very important to an association’s bottom line since membership numbers will fluctuate from year to year
    3. Annual Budget – Once the income and expenses are determined, it is imperative to set an annual budget based on the projected income and expenses so the Board and its members know how much money is allotted for each of the activities of the association

9)      What are the Benefits and Services of the Association?

    1. Establish the services/benefits that are included in members’ dues such as publications, a group insurance plan, discounted registration fees to certain meeting(s) throughout the year, discounted fees on certain products offered through your corporate partners, lobbying efforts, etc.
    2. Determine the services/benefits that members will be charged for to help generate additional income such as registration fees for seminars, meetings, meals, etc.

10)   What are the Bylaws of the Association?

    1. Defines the structure of an association
    2. Serves as a guideline for procedures
    3. Reflects the image of the association
    4. Examine bylaws of other associations to determine how to draft them
    5. May be required when applying for tax-exempt status
    6. Highly recommended to consult an attorney to help draft the bylaws
    7. Topics typically covered in bylaws include membership categories and qualifications; membership benefits and services; board members, their roles, qualifications and terms of office; election procedures, as well as other topics related to the members and board members

11)   What type of Management is best suited for the Association?

    1. Volunteer Staff – The Board Members would volunteer their time and do everything for the association
    2. Volunteer Staff plus Full-Time Employee(s) – The Board Members would volunteer their time along with 1-2 paid employees working out of a central office paid for by the association
    3. Stand-Alone Association – A large staff of paid employees working out of a central office paid for by the association
    4. Association Management Company – Hire an association management company so the association doesn’t have to pay employee benefits and payroll expenses or have the expense of a central office

Once the above steps are taken, the association will need to file for a Federal Tax ID number; design a logo; determine the mailing/office address; design and print letterhead, envelopes and other marketing materials; open bank accounts and obtain the necessary insurance policies.

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