Association Establishment

Written by Gio Saputra on 05/08/2024
The author’s views are entirely their own and may not always reflect the views of Putranto Alliance.

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Introduction

In an era where collective action holds significant influence, the establishment of associations has become increasingly vital. Whether formed by professionals seeking to advance their industry, communities aiming to amplify their voices, or non-profit organizations dedicated to specific causes, associations serve as powerful vehicles for achieving shared objectives. This article provides an in-depth exploration of the process of establishing an association, offering a detailed guide on creating a legally recognized and effective organization.

Definition

An association is a formal group or organization formed by individuals with shared goals, interests, or purposes. The process of association establishment involves bringing these individuals together to collaborate, network, and work collectively toward achieving common objectives. Associations can range from professional and trade associations to social and non-profit organizations.

Establishing an association creates a structured and organized group of individuals united by a common purpose or interest. Through this process, members collaborate, share knowledge, advocate for shared goals, and contribute to a stronger collective presence in their chosen field or area of interest.

In Indonesia, association establishments are regulated across several regulations, including Staatsblad 1870 Number 64 and Minister of Law and Human Rights Regulation Number 3 Year 2016 concerning Procedures for Submitting Applications for Legal Entity Validation and Approval of Amendments to The Association’s Articles of Association, as amended by Minister of Law and Human Rights Regulation Number 10 Year 2019.

The Importance of Association Establishment

Association establishment is crucial for several reasons:

Community Participation and Empowerment:
Associations aim to increase community participation and empowerment by providing services to the community. They serve as platforms where individuals with similar goals or professions can channel their activities and collaborate effectively.
Structured Collaboration:
Associations provide a structured environment for individuals to collaborate, share knowledge, and work towards common objectives. This structure helps in achieving goals more efficiently and effectively.

Advocacy and Representation:
Associations often advocate for the interests of their members, representing them in various forums and influencing policy decisions that affect their field or area of interest.

Resource Sharing:
By pooling resources, associations can offer more significant benefits to their members, such as training programs, networking opportunities, and access to industry-specific information.

The Best Time to Establish an Association

The optimal time to establish an association can vary depending on several factors:

Identified Common Goals:
When a group of individuals or entities identifies common goals or interests that require collective action, it is an ideal time to form an association.
Need for Advocacy:
If there is a pressing need to advocate for specific issues or represent a particular group's interests, establishing an association can provide a formal platform for such activities.
Resource Pooling:
When pooling resources becomes necessary to achieve more significant outcomes, forming an association can facilitate this process.
Regulatory Changes:
Changes in regulations or policies that impact a particular field or profession may necessitate the formation of an association to navigate and influence these changes effectively.
Market or Industry Evolution:
As markets or industries evolve, there may be a need for a collective body to address new challenges, opportunities, and standards.

Benefits of Association Establishment

Establishing a registered association offers numerous benefits:

Government Empowerment:
Registered associations are entitled to empowerment by the government, which aims to increase the resilience and independence of the association. This empowerment can include policy facilities, strengthening institutional capacity, and improving the quality of human resources, all financed through state or regional budgets.
Financial Independence:
Associations can establish business entities to support their financial independence. This allows them to generate income beyond membership fees and grants, ensuring sustainability and reducing reliance on external funding sources.
Tax Incentives:
Registered associations benefit from various tax incentives, which can enhance their financial stability and operational efficiency.
Legal Entity Status:
As a separate legal entity, an association can enter into agreements with third parties, own assets, and be represented in legal matters. This legal status provides a framework for accountability and governance.
Asset Ownership:
Associations can hold assets such as land, with rights like building use rights ("Hak Guna Bangunan") or rights of use ("Hak Pakai"), enhancing their operational capabilities.
Member Protection:
The members of the association, as individuals, are not responsible for the association's debts. All liabilities are limited to the association's property, protecting individual members from financial risk.

Association Establishment Process

To establish an association, the founder must follow a detailed procedure:

Choose the Association’s Name:
- The name must use Latin letters.
- It should consist of at least three words.
- It must form a coherent word without numbers or punctuation marks.
- It should not conflict with public order or decency
- It must not use the purpose, objectives, or activities as the name.
- It should not resemble the name of any existing association, legal entity, or banned organization.
Create and Execute the Association’s Deed of Establishment:
- This must be done in front of a notary.
Prepare a Statement Letter of Domicile:
- This letter, which includes the full address of the association, must be signed by the association management and acknowledged by the head of the village (Kepala Desa/Lurah).
Identify Funding Sources:
- Clearly outline the sources of funding for the association.
Develop Work Programs:
- Establish detailed work programs that the association will undertake.
Provide a Statement Letter Regarding Management Disputes:
- Confirm that the association is not involved in any management disputes or court cases.
Document the Minutes of the Association Establishment Meeting:
- Record the proceedings and decisions made during the establishment meeting.
Submit a Letter of Intent for Taxpayer Identification Number:
- The founder must express the intent to obtain a taxpayer identification number card.
Fill in a Statement Letter to the Minister of Law and Human Rights
- This letter must confirm that all data and supporting documents comply with legal provisions and that the founder is fully responsible for the accuracy of the information.

How We Can Help

Putranto Alliance provides valuable and experienced assistance in establishing an association. With an alliance of notaries and legal consultants, Putranto Alliance offers comprehensive support to ensure a smooth and efficient association establishment process. Services include:

Legal Consultation: Expert advice on legal requirements and compliance with regulations.
Create and Execute the Association’s Deed of Establishment: Help in preparing and executing necessary documents, such as the deed of establishment and statement letters.
Name Reservation: Guidance on choosing and reserving an appropriate association name.
Regulatory Navigation: Assistance in navigating the regulatory landscape, including submitting applications for legal entity validation.
Resource Provision: Access to essential tools and resources to facilitate the establishment process.

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FAQs

Can a registered association run a business?

Yes, a registered association is allowed to run its own business to ensure its funding source is not solely dependent on membership dues.

Could an association hold assets?

Yes, as a legal entity, an association can hold assets such as land. The rights to own land by the association can be in forms such as building use rights (“Hak Guna Bangunan”) or rights of use (“Hak Pakai”).

What is required to establish an association?

The process includes choosing a name, creating a deed of establishment, preparing a statement letter of domicile, identifying funding sources, developing work programs, providing a statement letter regarding management disputes, documenting the minutes of the establishment meeting, and submitting a letter of intent for a taxpayer identification number.

How does the government empower registered associations?

The government empowers registered associations through policy facilities, strengthening institutional capacity, and improving the quality of human resources, all financed through state or regional budgets.

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