Foundations and associations are two forms of non-profit organizations that are often used in an effort to achieve social or humanitarian goals. Although both have similar goals, there are fundamental differences in terms of structure, purpose, management, and legal responsibilities. The following is a review of the differences between foundations and associations, including an explanation of each form of legal entity.
Definition of Foundation and Association
A foundation is a legal entity established to achieve social, religious, or humanitarian purposes. Foundations are established by acquiring donated assets from third parties to be used exclusively for activities that have been set out in the foundation’s articles of association. Perkumpulan is a form of non-profit organization that also aims to fulfill social or community interests. Associations are often established by a group of people who have a common interest or purpose. The rules regarding foundations are contained in Law Number 16 of 2001 concerning Foundations (‘Foundation Law”) which has been amended by Law Number 28 of 2004 concerning Amendments to Law Number 16 of 2001 concerning Foundations (“Law 28/2004”). Meanwhile, the rules of Perkumpulan still refer to Staatsblad 1870 Number 64 concerning Associations with Legal Entities (“Stb. 1870-64”) and Book III Chapter IX of the Civil Code (“KUHper”). The foundation itself is a legal entity consisting of assets that are separated and intended to achieve certain goals in the social, religious and humanitarian fields, which do not have members. Unlike foundations, associations can be incorporated or unincorporated. This was also confirmed by the Head of the Service Quality Improvement Section of the DKI Jakarta Provincial Investment and One-Stop Integrated Service Office, Budya Prayanto Putra. As such, foundations are established as separate legal entities from their founders, while associations are usually more flexible in terms of legal structure.
What is the Difference between Foundation and Association?
Now, Sobat KH already knows the meaning of each foundation and association. For that, in order not to make the mistake of choosing the right form of business for the community or organization, KH pals need to pay attention to the differences between the two legal entities.
Differences in Legal Requirements
Legal Requirements of Foundation
A foundation is a legal entity that is separate and independent from its founder. The foundation establishment involves the process of making a foundation establishment deed made by the founder or founders of the foundation. This founding deed contains information about the foundation’s purpose, management structure, membership (if any), and decision-making procedures. Foundations are usually managed by a board of supervisors or a board of trustees. This board is responsible for overseeing the foundation’s activities and ensuring the foundation’s goals are achieved in accordance with the founder’s vision. Foundations may also have executive staff who manage the day-to-day operations and implementation of the foundation’s programs.
Legal Requirements of Association
Perkumpulan is also a legal entity formed through the process of making a deed of establishment. However, associations have a simpler structure than foundations. The deed of establishment of an association includes information about the purpose of the association, membership, and decision-making procedures. Associations usually do not have a supervisory board. The management of the association is based more on the decision of the elected members or board of the association. Members of the association have a more active role in decision-making and implementation of association activities.
Differences in Purpose
Foundation Objectives
Foundations are established with the aim of providing benefits to society or donating to certain social or charitable causes. The purpose of a foundation is often related to the field of education. Health, environment, research, or social activities. Foundations usually have a clear focus in achieving the social goals that have been set.
Purpose of the Association
An association is established by a group of people who have a common interest or interest in a particular field. The purpose of an association can be diverse, such as sports, arts, culture, or social activities. Societies focus more on activities that involve its members and encourage social interaction and collaboration in achieving the set goals.
Differences in Management
Foundation Manager
Foundations have a more formal management structure. Usually, a foundation has a board of trustees or a board of trustees that is responsible for overseeing the foundation’s activities in accordance with the objectives set out in its founding deed. This supervisory board usually consists of several members who have knowledge or experience in fields relevant to the foundation’s objectives. The board of trustees is tasked with making strategic decisions, overseeing the foundation’s finances and programs. It also ensures the foundation’s transparency and accountability to the public. In addition, the foundation may have executive staff who are responsible for managing the day-to-day activities and implementation of the foundation’s programs.
Association Manager
Association management is more flexible and is usually carried out by an association board consisting of several members. The board of the association has the responsibility to organize the activities of the association and safeguard the interests of the members. Decisions in the association are generally taken through deliberation or democratic elections among the members of the association.
Differences in Legal Liability
Foundation Law
The foundation has greater legal responsibility because it has a separate and independent existence from its founder. The foundation has the obligation to carry out the objectives set out in the deed of establishment and comply with applicable laws. The foundation must also report its finances and activities regularly in accordance with the requirements set by the government or the authorized supervisory body.
Law of Association
Associations have more limited legal responsibilities and are more dependent on member decisions, the legal responsibility of the association tends to be more direct to its members. Associations must comply with applicable legal provisions in carrying out their activities, such as meeting tax requirements and following regulations applicable to association activities.
Differences in Establishment Procedures
Foundation Establishment
The procedure for establishing a foundation involves several stages, including:
- Preparation of the deed of establishment of the foundation that includes the purpose of the foundation, management structure, membership (if any), and decision-making procedures.
- Collection of required documents and legal requirements, such as founder’s identity, domicile license, and other administrative requirements.
- Submit the deed of establishment and other documents to the authorized government agency, such as the Ministry of Law and Human Rights, to obtain legalization and determination of the foundation’s legal status.
- Once the foundation has been authorized, the next step is to take care of additional administration, such as opening the foundation’s bank account, tax registration, and ensuring other legal compliance in accordance with applicable regulations.
READ ALSO: Want to create a foundation?
Establishment of an Association
The procedure for establishing an association includes the following steps:
- Preparation of the deed of establishment of the association which contains the purpose of the membership association, decision-making procedures, and management structure.
- Collection of administrative requirements and necessary documents, such as founder’s identity, domicile license, and other supporting documents.
- Conduct a founding meeting to discuss and approve the deed of establishment and appoint the association’s management.
- Submit the deed of establishment and other documents to the authorized government agency, such as the Ministry of Law and Human Rights, to obtain authorization and determination of the legal status of the association.
- Once the association has been authorized, the next step is to take care of additional administration, such as opening an association bank account, tax registration, and ensuring other legal decisions are in accordance with applicable regulations.
This is an explanation of the differences between foundations and associations. In essence, in both establishment processes, it is very important to pay attention to the applicable legal requirements and ensure compliance with local government regulations. Therefore, consult with a competent party in legal matters or related institutions to obtain proper guidance before starting the process of establishing a foundation or association.
KH Contact
Want to establish a foundation or association, but still confused about the differences and the establishment process? Take it easy, KH buddy can consult with Kontrak Hukum.
READ ALSO: What are the Benefits of Community/Social Organization Establishing a Foundation?
Together with our professional experts, we can help you to establish a foundation or association, including the required legal documents such as deed of establishment, SK, NIB, NPWP, TDP, and OSS. For more information, please visit KH Services – Establishment of Business Entity page. Or if you still have questions about other types of business entities, do not hesitate to consult with us at Ask KH and direct message (DM) to Instagram @kontrakhukum.
