The inner metrics of an Association

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There has been some talk on this forum about not being able to find info on Associations, specifically how to start one and how to run one for profit. I thought I'd give the skeleton as described in my State's statutes and if anyone wanted to put meat on the bone, feel free.

BTW, none of this is legal advice. I merely copied our statutes so you can see how to do it. After all, the law almost always lays out how to do something for which they will collect fees and taxes. They are a for profit corporation even if they don't act like it. :-)

First, here is how an association (read corporation because it has to be incorporated) is defined:

"...may be formed by the voluntary association of any three or more persons in the manner prescribed (by law)..."

Please note the words: voluntary association of any three or more persons. This may not be true for your state. It may require five or more.

The particular association mentioned in the statutes has two restraints:

1) The corporation shall not have a capital stock, and
2) its business shall not be carried on for profit

This does not mean the Association cannot sell books, tapes, webinars, seminars, insurance, hold conventions, etc. It means it must not be doing those things for profit. In other words, the Association must use its money to advance its purpose (See Sec 2 under Articles of Incorporation below).

As regards memberships:

1) Any person or any number of persons, including and in addition to the original incorporators, may become members of the corporation upon such terms and conditions as to membership, and subject to such rules and regulations as to their, and each of their, contract and other rights and liabilities between it and the member, as the corporation shall prescribe in its bylaws.

Note the word bylaws. These are important and will be addressed below.

2) The corporation shall issue a certificate of membership to each member, (that is why AARP for example gives you a membership card) but the membership or the certificate thereof shall not be assigned by any member to any other person, nor shall the assigns thereof be entitled to membership in the corporation, or to any property rights or interest therein.

Note: What they are saying is only one person per certificate can be a member. However:

3. The board of directors may, however, by motion duly adopted by it, consent to such assignment or transfer, and to the acceptance of the assignee or transferee as a member of the corporation.

They are saying if the BoD says it is OK for you to assign your certificate, you can give it to your spouse for example. I'm not aware of any Associations that permit this but I don't know every existing Association's bylaws either.

This is how the law allows you not to transfer your membership:

4. The corporation shall also have the right, by its bylaws, to provide for or against the transfer of membership and for or against the assignment of membership certificates, and also the terms and conditions upon which any such transfer or assignment shall be allowed.

Articles of incorporation must be prepared and filed and they must be in writing setting forth:

1. The name of the corporation.

2. The purpose for which it is formed. (Note: This is the purpose which the Association must be advancing even if it is selling stuff hand over fist.)

3. The name of the person designated as the resident agent, the street address for service of process, and the mailing address if different from the street address.

4. The term for which it is to exist, which may be perpetual.

5. The number of directors thereof, which must be not less than three and which may be any number in excess thereof, and the names and residences of those selected for the first year and until their successors have been elected and have accepted office.

6. Whether the voting power and the property rights and interest of each member are equal or unequal, and if unequal the articles must set forth a general rule applicable to all members by which the voting power and the property rights and interests of each member may be determined, but the corporation may admit new members who may vote and share in the property of the corporation with the old members, in accordance with the general rule.

7. The name and post office box or street address, either residence or business, of each of the incorporators executing the articles of incorporation.

The State then goes on to tell you the details they want in a section titled:

Articles of incorporation: Acknowledgment; filing; evidence.

This section says:

1. The articles of incorporation must be:
(a) Subscribed by three or more of the original members, a majority of whom must be residents of this state.
(b) Acknowledged by each before a person authorized to take and certify acknowledgments of conveyances of real property.
(c) Filed, together with a certificate of acceptance of appointment executed by the resident agent for the corporation, in the office of the secretary of state in all respects in the same manner as other articles of incorporation are filed.

2. The secretary of state shall issue to the corporation over the great seal of the state a certificate that a copy of the articles containing the required statements of facts has been filed in his office.

3. Upon the issuance of the certificate by the secretary of state the persons signing the articles and their associates and successors are a body politic and corporate. When so filed, the articles of incorporation or certified copies thereof must be received in all the courts of this state, and other places, as prima facie evidence of the facts contained therein

Like almost everything in this world, you are allowed to change your mind after you incorporate. If you do, this is done under a process called amending. The section of the law covering that is titled:

Articles of incorporation: Amendment. Any such corporation may amend its articles of incorporation in any manner not inconsistent with the provisions of the statutes.

They explain it in 3 paragraphs:

Bylaws: Adoption; amendment; effectiveness.

1. Each corporation incorporated under statute must, within 1 month after filing articles of incorporation, adopt a code of bylaws for its government and management not inconsistent with the provisions of (all the statutes covering Associations). A majority vote of the members, or the written assent of members representing a majority of the votes, is necessary to adopt such bylaws.

2. The power to make additional bylaws and to alter the bylaws adopted under the provisions of subsection 1 shall be in the members, but any corporation may, in its articles of incorporation, original or amended, or by resolution adopted by a majority vote, or by written consent of a majority of the members, confer that power upon the directors. Bylaws made by the directors under power so conferred, may be altered by the directors or by the members. The written consent of a majority of the members suffices to adopt bylaws in addition to those adopted under the provisions of subsection 1, and to amend or repeal any bylaw.

3. All bylaws in force must be copied legibly in a book called the Book of Bylaws, kept at all times for inspection in the principal office. Until so copied, they shall not be effective or in force.

If you read the above closely this is the section that makes you keep records. And, they must be up-to-date records.

You probably forgot but I mentioned bylaws somewhere at the top this post. Here is what the State says about bylaws:

Bylaws: Permissible provisions. Each corporation organized under statute may also, by its bylaws, provide for the following matters:

1. The manner of removal of any one or more of its directors.

2. The manner of filling any and all vacancies of the board of directors.

3. The conditions upon which and the time when membership of any member in the corporation shall cease; the mode, manner and effect of expulsion of a member, subject to the right of the expelled member to have the board of directors equitably appraise his property interests in the corporation and to fix the amount thereof in money, and to have the money paid to him within 60 days after such expulsion.

4. The amount of membership fee, if any.

5. The amount which each member shall be required to pay annually, or from time to time, if at all, to carry on the business of the corporation.

6. The compensation, if any, to be paid by each member for any services rendered by the corporation to him, and the time of payment and the manner of collecting the same, and may provide for forfeiture of the interest of the member in the corporation for nonpayment of the same.

7. The number and qualifications of members of the corporation.

8. The conditions precedent to membership.

9. The method, time and manner of permitting members to withdraw.

10. The assignment and transfer of the interest of members, and the manner of determining the value of such interest and providing for the purchase of such interest by the corporation upon the death, withdrawal or expulsion of a member or upon the forfeiture of his membership, at the option of the corporation

Like everything else in this world, the voting power of the members doesn't have to be equal. In fact the State allows that to happen by saying:

Bylaws: Provisions for unequal voting power. If the bylaws shall provide for unequal voting power, or unequal property rights of the several members, or both, the provisions of (the statutes covering Associations) with reference to a majority, a two-thirds or other vote of the members, shall not apply, and, in lieu thereof, there shall be substituted a majority of the votes of the interests represented by the several members or otherwise as the case may be.

An Association is granted the same powers as any other corporation. The State puts it in writing by enumerating those powers in a section titled:

General powers.

1. Each corporation incorporated under (the statutes covering Associations) has the powers granted by the provisions of other laws of Nevada relating to private corporations which are not inconsistent with those granted by (the statutes covering Associations).

2. In addition to the powers granted in subsection 1, each corporation has the following powers:
(a) To appoint such agents and officers as its business may require, and such appointed agents may be either natural persons or corporations.
(b) To admit natural persons and corporations to membership in the corporation.
(c) To expel any member pursuant to the provisions of its bylaws.
(d) To forfeit the membership of any member for violation of any agreement between him and the corporation or for his violation of its bylaws.
(e) To purchase, lease, or otherwise acquire, hold, own and enjoy, sell, lease, mortgage and otherwise encumber and dispose of any and all and every kind of real and personal property, except as otherwise provided in statutes.
(f) To carry on any and all operations necessary or convenient in connection with the transaction of any of its business.

There you have it. Everything you wanted to know about Associations. If you can't figure out how to make a few bucks with an Association after reading all of the above, apply to the school district. They are always looking for bus drivers. :-)

Hope this clears up all the questions.

Mind you what you just read applies to only one state. Your state or country will have its own statutes or codes or laws that do what the above does in my state. Find them and read them and do what you think is right for you.

Good luck.
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