How and why to set up an association: a step-by-step guide

Are you considering whether an association is the right solution for your plans, or have you already made the decision but don't know how to get started? We'll guide you through the whole process of setting up a society from the initial idea to registration with the society register and the responsibilities after the actual incorporation - so you're clear on the what, why and how to get things done.

What is an association?

A society is a voluntary, non-profit association of at least three persons who are united by a common interest. It does not serve a business purpose, but brings together people with the same interests and helps them to achieve common goals. It can be about supporting a good cause, working together or sharing experiences.

Most often, associations are formed for the purpose of:

• sporting activities - promoting sport through training, tournaments or competitions;
• cultural activities - revitalising cultural life through exhibitions, concerts or theatre performances;
• education - disseminating knowledge through courses, workshops or lectures;
• conservation - implementing environmental projects, caring for the environment and promoting sustainability.

To be legally recognised, it is not enough to say "we are an association" - legal obligations must be fulfilled and the association must be registered in the public register. Only then can it officially carry out its activities and operate as a legal entity.

Who is the association suitable for?

Unlike a business, which aims to make a profit, an association's income must be used to support its main activity, which is non-profit-making. An association will provide you with an appropriate legal framework if you want to pursue socially beneficial objectives at the same time:

For social service providers, as well as for those interested in charity, it is often better to choose another form of non-profit instead of a society - an institute, foundation or endowment fund.

On the other hand, if your primary goal is profit-making, a trade or limited liability company may be a better choice.

What to think about before setting up a society?

1/ The name of the association

By law, the name of the society must:

• Be unique, i.e. it must not be identical to another entity in the commercial register;
• contain the word "association", "registered association" or the abbreviation "z. s.".

The name should reflect the focus of the association, e.g. Club of Friends of Nature, z.s. or Society of Jeseník Artists.

2/ The purpose of the society

Determine the purpose that your society will focus on - the main non-profit activity that will form the core of its mission. In addition, you can also implement complementary activities, the proceeds of which should always support the primary purpose of the association or ensure its operation.

Ancillary activities can take many forms - from a side business, such as a sole proprietorship, to non-profit activities, such as volunteer projects or organized events.

3/ Headquarters of the association

Each association must have an official address, which will be:

• listed in the bylaws;
• registered in the public register.

The registered office does not have to be just an office or commercial space - it can also be a property owned by one of the founders or a virtual office, but you must always get the consent of the owner of the property.

4/ Members of the association

At least three founders are required to form an association, which can be individuals or companies. It is also important to clearly state in the statutes of the association under which conditions other entities can become members, what rights and obligations they will have and when their membership will end.

To support the activities of the association, you can also set up regular membership fees to help cover operating costs or rules for members' involvement in joint activities.

What documents do you need to set up a society?

The affidavit of the members of the statutory body confirms their fitness to hold office and should therefore include in particular:

• personal identification data (name, surname, date of birth and permanent address),
• a declaration of legal capacity and integrity,

• confirmation that there are no obstacles to the exercise of the functions of the office.

The affidavit shall also include consent to entry in the Federal Register and acceptance of office. Finally, a specimen signature for acting on behalf of the association is attached.

How do I apply for registration of the association in the register?

You can only apply for the registration of an association in the public register once you have the necessary documents and you and the founders have agreed on the essential matters - i.e. the wording of the statutes, the election of the bodies and the registered office of the association. In case of disagreements, it is necessary to convene a constituent meeting where you will resolve the disputed issues together and formally agree on the conclusions.

Once all the steps have been completed, you can file a petition for registration with the registry court that corresponds to the location of the association's registered office. In Prague this is the municipal court, in other parts of the country this agenda is handled by regional courts.

An application for registration of an association in the public register can be submitted in several ways:

• By means of an electronic form - by submitting it to the public register; you attach the necessary documents in PDF format to the completed form and sign it with a guaranteed electronic signature.
• In person or by post - by handing/sending the documents in hard copy to the registry court.
• Via the data box of an individual - via the data box of one of the founders or the elected statutory representative, as the association does not have its own data box before registration.

Remember that the affidavit of the members of the statutory body, as well as the consent of the owner of the property where the association will have its registered office, must have signatures with official verification. This also applies to the power of attorney granted by the members of the association to the petitioner applying for the registration of the association in the public register.

What to remember after the formation of the association?

The registration of the association in the public register is not the end of your obligations. In order for the association to function well and everything to be in accordance with the law, it is necessary to arrange a few more important things.

1/ Registration for corporate income tax

If you arrange a trade licence for your association to run a secondary business, you must register it for corporation tax. You must submit the registration within 15 days of the association's registration to the tax office responsible for its registered office. You can complete the registration either in person or conveniently online via the Public Administration Portal.

2/ Bookkeeping

Bookkeeping is compulsory for associations and its form depends on the size and scope of the organisation's activities. You can choose between two options:

If you also choose to run a side business, be sure to keep separate records of charitable and profit-making activities.

3/ Transparent management

Every association is required by law to regularly publish its financial statements in electronic form in a collection of documents. Its form usually depends on the complexity of the accounts:

• Societies without subsidies and with a limited scope of activities (non-VAT payers, whose annual income and value of assets do not exceed CZK 3 million) that keep simple accounts have simplified rules when compiling their financial statements. In this case, the accounts include only a list of assets and liabilities and a summary of income and expenditure.
• Associations with larger financial operations which keep (double) accounts draw up comprehensive accounts. These include a profit and loss account, a balance sheet and a note which explains each item in detail.

4/ Filing the tax return

Even if the association is not in the business of making a profit, it is obliged to file a tax return on a regular basis. However, some income from core, non-profit-making activities is not taxable under certain conditions, similar to grants.

Setting up an association: with a consultancy firm or on your own?

You can set up a society on your own or entrust the administration to a consultancy company. We have prepared a clear comparison so that you can decide which option is more suitable for you.