What you need to know before setting up an NGO and its benefits compared to other forms of organization
Setting up an NGO (non-governmental organization) is an important step for those who want to contribute to community development, support social, cultural, educational or environmental causes. However, it is essential to understand the legal, administrative and financial implications of this process, as well as the advantages and differences compared to other forms of organization.
1. What is an NGO?
An NGO is a legal entity under private law, without a patrimonial purpose, which carries out activities of public or community interest. In Romania, NGOs are regulated by OG no. 26/2000 and can have the following main forms:
Associations: Formed by at least 3 people who wish to carry out joint activities.
Foundations: Created based on a larger initial patrimony, to support well-defined purposes (e.g. education, health).
Federations: Structures formed by several associations or foundations.
2. What do you need to know before setting up?
a) Purpose and objectives of the NGO
It is essential to clearly define the mission of the organization: What problem do you want to solve? What is the desired impact?
The activities of the NGO must be non-profit and pursue a goal of general, community or collective interest (e.g. environmental protection, education, humanitarian aid).
b) Financial and human resources
Initial assets: For an association, the minimum assets required to establish an NGO were eliminated, with the entry into force of Law no. 276/2020. In the case of a foundation, the minimum assets are at least ten times the gross minimum wage in the economy, at the date of the foundation's establishment.
Team: You need founding members, volunteers or employees to support the activities of the NGO.
c) Required documents
To establish an NGO, the following are required:
NGO Statute: These define the purpose, activities, management structure and operating rules.
Documents regarding the registered office: Lease agreement, deed of trust and proof of ownership of the space.
Tax record of the founders: The founders must have no tax history.
d) Legal registration
The establishment process involves:
Submitting documents to the competent territorial Court.
Obtaining the Certificate of Registration in the Register of Associations and Foundations.
Tax registration with ANAF.
3. Benefits of an NGO compared to other forms of organization
a) Tax advantages
Tax exemptions: NGOs are exempt from corporate tax for income obtained from donations, sponsorships, subsidies or membership fees.
Tax deductions: Individuals and legal entities supporting NGOs can benefit from tax deductions for donations and sponsorships (e.g. redirection of 3.5% of income tax).
Reduced VAT: NGOs can benefit from reduced VAT for certain activities.
b) Access to funding and grants
NGOs have access to various sources of non-reimbursable funding:
European grants: Funds for educational, environmental, cultural projects, etc.
Sponsorships and donations: From companies or individuals.
Public subsidies: Granted by local or central authorities for projects of public interest.
c) Flexibility in purposes and activities
NGOs have the freedom to carry out activities in a wide range of areas, such as:
Environmental protection, education, health, culture.
Humanitarian or social activities.
Promotion of human rights or equal opportunities.
d) Reputation and credibility
NGOs are perceived as being oriented towards the good of the community, which makes them attractive to supporters and donors.
By lacking a commercial purpose, they can more easily attract volunteers and partners.
e) Possibility to generate income
Although they are non-profit, NGOs can carry out economic activities (e.g. selling products, organizing events), and the income obtained must be reinvested in the goals of the organization.
4. Challenges of NGOs compared to other forms of organization
Bureaucracy: The establishment and administration of an NGO involves more formalities than other forms of organization.
Financial limitations: NGOs cannot distribute profits among members, and their financial resources often depend on donations or grants.
Rigorous monitoring: NGOs are subject to strict controls on the use of funds and compliance with the declared goals.
Conclusion
NGOs are an excellent choice for those who want to contribute to the development of society or support causes of public interest. Before establishing an NGO, it is essential to clearly define the purpose of the organization, understand the legal obligations and identify the necessary resources. Compared to other forms of organization, an NGO offers numerous tax benefits and funding opportunities, but also increased responsibilities in managing activities and funds.