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We are often contacted Clients with questions as for creation of organizations that can collect funds , things or medicines for help victims during the war , or for restoration our country.
There is the questions which form to choose. Charitable fund or Public organization? After all it two completely different forms social activity public society. In addition, they are regulated by different laws.
One can say that target of creation these organizations is humanitarian help and satisfaction of humanitarian needs, but the task are solved at the same time different. And mechanisms the work of such organizations is also different.
Some are only collecting the redistribute help. Other are finance projects which will help, for example to build safe housing for those who lost homes. They are looking for planners, designers, builders.
So, what are the main fundamental differences of Charitable funds (CF) from Public organizations (PO):
- CF implements charitable activity (accumulates charitable donations and to them distributes in the form assistance ). PO protects rights and freedoms, satisfies public, in particular economic, social , cultural , ecological , and others interests. In this way the sphere of activity of the CF is targeted help those who need it. PO assistance development civil society according to certain directions, financing projects, educational and others programs in such directions.
- CF can be created by one person , PO creators must be two as least.
- Entrepreneurial activities maybe carry out only by PO (without the purpose of obtaining profit and in order to achieve the goal of the PO). CF cannot carry out such activity.
- PO can finance any projects (construction , procurement goods), order services and works , if these projects are in the field PO activities . CF can finance only those projects , services and works which have addressable appointment.
- Administrative expenses ( salary , maintenance office ) for CF is limited to 20% of received revenues are not limited for PO.
The table shows the difference in more detail.
| Form | Goal | Project financing (sources of activity) | Salary to employees | Audit (tax reporting) |
|---|---|---|---|---|
| Charitable organization ( charity society , charity institution or charity fund) | Can be created by one or by several founders and to be managed participants who are not obliged transfer any to her assets to achieve goals charitable activities. From ours experience exactly charitable organizations most for others form non-profit organizations suitable for receiving humanitarian assistance , implementation grants programs , involvement donor resources for volunteers and people who are engaged in with the help of the Armed Forces, vocational training and reconstruction countries in the future. | - Funds , property and donations - Grants - Income from endowments - Free rent or free of charge receiving services - Patronage support Attention: CF has no right to receive help from state bodies, if this is not foreseen in the Charter . For example , if in the Charter missing Provisions on receiving free of charge basis premises for rent from state / local bodies self -government is any such agreement rent will be outside the Charter and has the risk of being recognized invalid with the corresponding consequences. | - In order to organization functioned , needed volunteers and employees. The volunteers perform work without receiving wages , employees arrange labor by the contract and paid salary the source of wages may include income ( grants , donations _ programs , donations , etc. ) Administrative expenses cannot be more than 20 percent of income . Therefore , the wage fund can not exceed this number | Usually, donor or grant programs involve the provision of various reports and audits, which can be even stricter than the usual domestic audit. Also legislation of Ukraine provided a separate type of tax reporting for non-profits organizations |
| Public organization ( public organization , public union ) | Can be created by minimum 2 founders . The main purpose of creation is satisfaction public interests , not accumulation and distribution income ( humanitarian assistance ) in contrast from Charitable Fund. Also , Public organization has the right to financial support from state , receive profit from entrepreneurial activities and perform state order. | Money , property , what received as membership contributions - Help states , execution state contracts Income from entrepreneurial activities. | There is no upper limit for administrative fees . So there is no restrictions of The law for the size salary or the staff allowance. |
Why is it important to choose the right form of organization in accordance with the goal? Over the past 5 months, Ukraine has demonstrated high "flexibility" in changing the norms that regulate the activities of charitable and public organizations. These regulations simplify the receipt and distribution of humanitarian aid. One day the war will end, but this does not mean that the activities of such organizations will end. In our opinion, they will drive the "great reconstruction". Success in pe;acetime depends on how the organization plans its future, how it structures its activities.
How can Bakhmach and Partners be useful?
- We help to choose and build a charitable or public organization, depending on how you see the activities of your organization;
- We will develop internal documents (programs, regulations), taking into account all the nuances of domestic legislation;
- Making other changes to the constituent documents;
- Consulting on taxation of charitable or public organizations.
We also want to contribute to the development of such organizations, so we have prepared document templates that will help you create a Charitable Fund on your own. At this link, there are document templates on Google Drive