There are 2 (two) basic institutional ways to organize a nonprofit organization under the Brazilian legislation: nonprofit association or private foundation. The foundation is originated from assets allocated by an individual or legal entity for social purposes, while the nonprofit association is originated from the will of a group of entities or individuals joined together by a common social purpose.
The general terms and conditions of an association are set forth in the Brazilian Constitution and the Civil Code. The Association is defined as an organization of people joined together with a lawful non-economic purpose. The Association does not require any kind of authorization to be organized and the State is not allowed to interfere in its operation.
The Association must register its Articles of Organization with the Civil Register of Legal Entities in order to become a private legal entity. The Articles of Organization will contain the main features of the Association, such as: (i) the corporate name, purposes, and address of the Association; (ii) the requirements for the admission, dismissal and exclusion of associates; (iii) the rights and duties of the associates; the sources of the funds for its maintenance; (iv) the means of constitution and functioning of its management and deliberative boards; (v) the conditions to amend the Articles of Organization; and (vi) the conditions for the dissolution of the Association.
The Foundation, defined as the total assets allocated for social purposes, is a nonprofit private legal entity governed by the Civil Code. In order to organize a Foundation the founding member(s) shall donate, by will or public deed, assets which shall be free and unencumbered. Such donation shall specify the Foundation's purposes, which, in accordance with the law, must be of religious, moral, cultural or social assistance nature.
Differently from Associations, the Foundations are subject to the respective State Government Attorney's Office, which will, among other tasks, monitor the functioning of the Foundation, assuring that the Foundation complies with its purposes, as defined in its Articles of Organization. The Foundation must register its Articles of Organization with the Civil Register of Legal Entities in order to be considered a legal entity.
The Association and Foundation, depending on their corporate purpose and characteristics, can fit within the requirements to be qualified as an OSCIP (Organization of a Civil Entity of Public Interest), or qualify themselves be certified as Philanthropic Purposes Entity, or be declared as For Public Utility.
If certain legal conditions are met, the Associations and Foundations are exempt or immune from corporate income taxes (in Portuguese, Imposto de Renda da Pessoa Jurídica and Contribuição Social sobre o Lucro Líquido) applicable to Brazilian legal entities. Moreover, under some legal conditions, some other tax benefits are granted (e.g., exemption of some federal and municipal taxes due on gross revenue related to their proper activities, municipal tax on their real properties, among others). In addition, the value of the donations made to an Association or Foundation by persons may be deducted under certain circumstances and up to certain limits.
Maria Lúcia de Almeida Prado e Silva is a partner at Demarest Advogados and head of the firm's Corporate practice.
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