Difference Between a Foundation and an Association

In Costa Rica, there are two types of fundamental organizations that correspond to a non-profit “company” those are: Associations “Asociaciones” and Foundations “Fundaciones”.

Associations and foundations are entities that seek to do good to society. But, despite pursuing the same end, there are some differences between them.

An Association is a group of people who come together, associate to achieve an end. This purpose is a non-profit organization constituted by 10 or more people for the realization of a common lawful purpose, of general or particular interest, additionally, the figure must necessarily have a Board of Directors (chosen by the associates) with at least 5 positions. The purposes of this figure are essentially social welfare, and for this reason, net proceeds should be donated for educational, recreational, charitable purposes, and so on. Among the most interesting characteristics of the associations is that they are exempt from taxes.

The law authorizes the creation of Associations for “scientific, artistic, sports, charitable, recreational purposes and any other legal purpose that is not solely and exclusively for profit”.

Some of the essential requirements for registering the statutes of an Association are:

• Minimum 10 members
• Indicate the month and frequency with which the ordinary annual meeting is held.
• Type of guarantee that the Treasurer must provide for the fulfillment of his functions.
• Procedure to appoint liquidators, in case of voluntary dissolution.
• Publication of an edict.
• Entity name.
• The address of the Association.
• The objective pursued and the means to achieve it.
• Membership and form of disaffiliation of the associates, rights, and duties of the same.
• Resources available to the association and the body that establishes income and periodic fees, if applicable.
• Organs of the association, procedures to establish, call and complete them, how to resolve them, make their publications and act, competence and termination of their exercise, when appropriate.
• The person who has the representation of the entity and the scope of the power.
• Conditions and methods of dissolution.
• Procedures to reform the statutes.

The Foundation responds to an organization constituted (also) non-profit, in foundations, the use of a specific patrimony is intended to be useful in charitable, educational activities, or any activity that carries a denotation of social good. The number of participants to form a Foundation must be at least 1 natural or legal person; the founding person appoints 3 members of the Board of Directors. The advantage over the association is that decisions are made by the body under the tutelage of the founder, while in the association you must have the approval of the associates and even hold assemblies for decision-making.

Costa Rican law recognizes Foundations as “private entities of public utility, which are established non-profit and with the purpose of carrying out or helping to carry out, through the use of a patrimony, educational, charitable, artistic or literary, scientific and in general all those that mean social welfare”.

The essential requirements for the registration of the statutes of a Foundation are:

• At least 1 natural or legal person.
• Publication of an edict.
• Entity name.
• Exact address of the Foundation.
• Foundation heritage.
• Purposes pursued.
• Foundation term.
• Appointment of the director (s).
• Foundation administration.
• Supervisory body.
• Dissolution form.

Both organizations, associations, and foundations are the perfect organizational structures to develop social initiatives in a variety of areas of action such as environmental protection, education, housing, help for people and animals, among others.