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What’s The Difference Between An Association And A Nonprofit?

What’s the Difference Between an Association and a Nonprofit?

In the U.S., there are over 1.5 million not-for-profit corporations.  Within this group, there are many different designations of nonprofit – determined by the IRS through its tax-exempt rulings.  Beyond the basic IRS distinction, each type of nonprofit entity has some distinctions in terms of business operations, finance, staffing, board governance and programs.

Below, I’ve tried to highlight some of the key differences between organizations that identify themselves as “nonprofits” versus “associations.”  These distinctions are a bit general – and there are definitely exceptions to each one.  That said, I find these statements to be generally true for most nonprofits and associations, and thus they can be helpful to understanding some of the basic differences in how these organizations operate, their structures and how their boards function.

Nonprofits

Associations

Mission-focused organizations:

most organizations that think of themselves as “nonprofits” are charitable organizations with a specific mission focus.

Membership-focused organizations:

associations generally think of themselves as membership organizations, with the primary focus of providing services and benefits to members of a specific group (e.g., a professional association, trade group, industry-specific association)

IRS Tax Designation 501(c) 3:

this is the IRS tax-exempt designation given to Religious, Educational, Charitable and other organizations focused on mission fulfillment.

IRS Tax Designation 501(c) 4 or 501(c) 6:

while some associations are charitable and tax exempt, more are given this IRS tax designation to identify them as professional associations that are not tax-exempt.

One Nonprofit = One Executive Director:

most nonprofits have a unique Executive Director hired by the board to run the organization.

Executive Director might oversee multiple associations: 

for many associations, it’s very common that their Executive Director has a certification called “AE” (Association Executive) and that he runs multiple associations – sometimes as part of an Association Management Company (AMC) hired by associations to run their back-office operations.

Staff size ranges from small to large:

Depending on the size of the nonprofit, the staff size can fall into a range similar to that of other corporations.

Staff sizes tend to be small:

For many (but not all) associations, the staff might only be one to three people.  Associations run by an AMC might have a few staff people, but they are most likely shared across a number of associations also managed by the AMC.

Board Members & Officers elected by the board:

For most nonprofits, the board has the power to elect its own members and officers.

Board Members & Officers elected by the membership:

For most associations, board elections are large events where every member of the association has the opportunity to vote for the new slate of directors and officers.

Board & officer terms vary and might not be well-defined:

For many nonprofits, board terms and the election of officers might not have hard-and-fast rules; even if there are guidelines in the bylaws, they might not be adhered to rigorously.  Mostly, this is because nonprofits can struggle to find qualified candidates to serve on the board, or to fill officer roles, and could have open board seats (sometimes for years at a time).  It’s not unusual for a board member or officer to serve in the same role for many years.

Board & officer terms are well defined:

For most associations, since board members and officers are elected by the membership, the terms are clearly defined and board seats can become competitive (with multiple candidates vying for the same seat).  It would be extremely rare for an association’s board to have open seats for any reason other than an unexpected board member departure.  Officerships are seen as prestigious, and possibly highly competitive, positions.

Board members are from diverse backgrounds, representing a cross-section of stakeholder interests:

Board composition in the nonprofit sector focuses on building a solid group of highly skilled professionals who can represent the interests of the organization’s stakeholders appropriately.  There is a strong focus on diversity, and on finding the best “fit.”

Board members come from the membership and are leaders who win an election cycle:

Because association boards most often are elected by the broader membership, there is less emphasis on building a diverse bench of qualified candidates, and more emphasis on electing leaders who will appropriately represent the interests of the membership.

Bylaws and policies can be easily amended by the board:

For many nonprofits, changes to bylaws and policies can happen in a straightforward way.  A committee – usually the Governance Committee – will suggest changes to the bylaws or policies and the board votes on the changes.  Any bylaws changes are then filed with the state of incorporation of the nonprofit.

Bylaws and policies might require membership approval, and are done less frequently:

Because associations are, first and foremost, membership organizations, any bylaws changes would require a period for member discussion and review, and potentially a vote by the membership.  Bylaws and policy changes are therefore done more formally and less frequently than at other nonprofits.

 

Dottie Schindlinger

Dottie is BoardEffect’s Governance Technology Evangelist and promotes the concept of Governance for Good as a leading expert in the field. She researches governance trends and writes for a variety of publications, including the definitive chapter on “E-governance Is Good Governance” for Internet Management for Nonprofits: Strategies, Tools & Trade Secrets, Ted Hart, Steve R. McLaughlin, James M. Greenfield, Philip H. Geier, Jr., Eds., April 2010: Wiley & Sons, New York, NY. A frequent presenter on the topic of good governance, Dottie speaks to dozens of audiences – both in the US and abroad – and presents hundreds of webinars each year.

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