Starting a nonprofit organization may seem like a complicated process, but all you need is a careful plan and the right information. Thanks to our article, you can handle starting a nonprofit organization even without a law degree.
Starting a nonprofit organization may seem like a complicated process, but all you need is a careful plan and the right information. Thanks to our article, you can handle starting a nonprofit organization even without a law degree.
A non-profit organisation is a legal entity whose primary purpose is not to make a profit for its founders or members. Profits, if any, must be used solely to fulfill its purpose. This may be, for example, the development of association activities, charitable support, education or care for the environment.
Typical characteristics of a non-profit are:
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According to the Civil Code and the Law on Public Registers, a non-profit organisation can be established in the following main forms:
| Form | Number of founders | Min. deposit | Method of formation | Suitable for |
|---|---|---|---|---|
| Registered association | min. 3 persons | none | registration in the association register | clubs, associations, hobby activities |
| Foundation | individual or more | 500 000 CZK | notarial registration and register | long-term public benefit objectives |
| Endowment Fund | individual or more | not specified | memorandum of association + register | short-term charitable projects |
| Institute | individual or more | recommended 1 CZK+ | charter + register | provision of social services |
Starting a non-profit organisation is worthwhile if you do not want to run a business for profit, but your goal is to fulfil a socially beneficial mission. It is particularly suitable for those who want to bring together people with the same interests, be it sports, culture, education or ecology, and who also need to act externally in an official capacity, for example in dealing with authorities, schools, cities or the media.
A non-profit organisation is also an ideal choice if you plan to apply for grants, donations or subsidies, as most of these forms of support are specifically for legal entities with a non-profit purpose. On the other hand, if you want to primarily earn a living through your activities, the non-profit form is not appropriate. In this case, we recommend that you rather set up a sole proprietorship or a limited liability company (s.r.o.), which are designed specifically for business.
Let’s focus first on the most common form, which is a registered association.
1. First, the founders must agree and prepare the articles of association
You must be at least three individuals or legal entities. Agree on:
2. A constituent meeting should then take place
A constituent meeting is not compulsory, but it is certainly appropriate. There you can approve the statutes and elect the statutory body. You should then draw up the minutes of the meeting and the attendance register. If you are not sure what the constitution should contain, we will be happy to help you prepare it.
3. Apply for registration
The application for registration is made on a Ministry of Justice form to the local county court (based on the registered office of the association). You can submit it by data box, by post or in person.
You must also attach the following annexes to the application for registration: the articles of association, the memorandum of association, the consents to registration and to the location of the registered office (with certified signatures) and proof of authorisation to conduct business (if the secondary gainful activity is to be carried out).
4. After registration, the association is formed
The association officially comes into being on the date of registration in the public register. At the same time, you obtain an ID number. The registration is free of charge.
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An individual can establish a foundation or endowment fund in the Czech Republic without the need for an association of several persons. However, in the case of a foundation, it is necessary to draw up a deed of incorporation in the form of a notarial deed, as it is a public document. The deed must state the name and registered office of the foundation or fund, the purpose for which the organisation will be established, the amount of the foundation’s contribution (in the case of a foundation, at least CZK 500,000), the composition of the board of directors and the supervisory board, and the name of the person who will act as the administrator of the deposits.
The drafting of the charter is followed by the filing of a petition for registration in the public register, and only with this registration does the legal entity officially come into existence and receive its identification number (IČO).
In the case of a foundation, the whole process is simpler – there is no minimum deposit and the instrument of incorporation does not have to be in the form of a notarial deed. This makes an endowment fund more suitable for shorter-term or more flexible projects where long-term management of larger assets is not envisaged.
An institute is a specific form of non-profit organisation that is most often used to provide social, educational or other public services. Its establishment is administratively less demanding than that of a foundation, as a notarial form of the constitution is not required. This charter must contain the name and registered office of the institute, a statement of the purpose it wishes to achieve, the amount of the contribution (not prescribed by law, but at least a symbolic value is recommended), and a description of the internal organisational structure, including the method of management and the functioning of the board of directors.
After the constitution has been drawn up, a proposal for registration in the public register of institutes, which is kept by the regional court, must be submitted. The institute is officially established only on the date of registration, when it is also assigned an identification number.
The financing of a non-profit organisation is one of the key issues to think about at the very beginning of the activity. Even if a non-profit is not established to make a profit, it needs a stable financial basis to function. Whether it’s operating costs, utilities, space rental, staff salaries, or the actual fulfillment of its mission.
The most common source of funding is donations from individuals and businesses. An advantage for donors is the ability to deduct the value of the donation from the income tax base, which makes people more willing to donate to nonprofits. Another important source is subsidies and grants, both from public budgets (e.g. Ministry of Education, Youth and Sports, regions, cities) and from EU funds. However, obtaining a grant requires a well prepared application, compliance with the terms of the call and subsequent accounting.
Many non-profits also earn money through entrepreneurial activities, such as selling promotional items, organising events or renting premises. However, these activities must be incidental and the proceeds must be used exclusively for the main activity of the organisation. For associations, membership fees are also a frequent source of income, for example to cover the costs of joint activities.
Public collections and crowdfunding are another way to raise financial support from the general public. However, it must be taken into account that public collections must be duly registered under the Public Collections Act. Crowdfunding (e.g. on Hithit or Donio) is a more modern form of fundraising that is particularly suitable for specific short-term projects.
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Non-profit organisations are accounting entities under the Accounting Act and are therefore obliged to keep accounts regardless of their legal form. The type of accounting they can keep depends on the amount of their income and whether they are subject to VAT.
If a non-profit organisation is not a VAT payer and its income and value of assets for the last accounting period does not exceed CZK 3 million, it may keep simple accounting, i.e. tax records. Other non-profits that exceed these limits must keep double-entry books, just like business entities.
At the end of the accounting period, non-profit organisations are obliged to draw up financial statements, a statement of income and expenditure and a statement of assets and liabilities, if applicable, and subsequently submit this documentation to the registry court.
The establishment of a non-profit organisation is an accessible process, where the key is to choose the right legal form (most often a registered association, foundation, endowment fund or institute), prepare the statutes or articles of association and submit a proposal for registration in the public register, which will give the organisation legal personality and an ID number. A non-profit may not make a profit for its members, but all funds must be directed towards a socially beneficial goal, such as the promotion of sport, culture, education or charity. Funding is mainly provided by donations, grants, subsidies, membership fees, or incidental business activities, whereby donors can claim tax benefits. Non-profit organisations have to keep accounts (simple or double-entry depending on turnover) and prepare financial statements, and enjoy tax advantages. This format is ideal for an association of persons with the aim of fulfilling a public benefit mission and applying for financial support, not for a for-profit business.
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