Introducing Associations: What are they?

After completing this lesson, you will be able to:

  • Define what an association is and identify the different types of associations

Please join Sidecar in welcoming Amith Nagarajan. Amith is the chairman of Blue Cypress, which is a family of companies that work to help associations. Throughout this course, Amith will provide you with an overview and share his own personal insight about associations and the work associations do for and with society.

As Amith stated, an association is a group of people who want to combine their energy and resources to pursue a common goal. Associations are everywhere, for everyone and for everything.

There are three main types of associations: professional, trade and social. Regardless of the type of association, they all have a common focus to connect people who have a common interest or goal. Associations work to make meaningful impacts by helping people to move forward a profession, industry or cause. Associations work because people come together to connect with each other

So what is an association?

Associations are organizations focused on serving the needs of their members through achieving common goals, and they are typically established as not-for-profit organizations. 

The IRS defines an association as, “a group of persons banded together for a specific purpose.” 

This definition leaves a lot of room for interpretation with a lot of history. 

Associations in the United States have a long history that started with the first American settlers who formed guilds based on British trade groups to address common challenges and support each other’s work and lifestyle. (Source: The Power of Associations

The rich history of associations is proof that they serve an important and influential role within many communities. Let’s continue to explore this question even deeper. 

Association facts:

  • In 2009, there were more than 1.9 million U.S.-based associations. Of the 1.9 million organizations, 90,908 were classified as 501(c)(6) trade or professional associations, and 1,238,201 were classified as 501(c)(3) charities, foundations or religious organizations.
  • Associations employed more than 1.6 million people in all 50 states in 2009; 1.2% of the private sector workforce in the U.S. works for an association.
  • Associations create jobs in every state, with employment highest in California, New York, Illinois, Florida and Pennsylvania.
  • Nearly 1 in 10 workers in Washington, DC, is employed by an association.
  • Trade and professional membership associations generate $116 billion in revenue.
  • Geographically, most associations in the United States are located in Washington, DC, Chicago and New York. International associations are mainly in Canada, the UK and Australia.  

Source: ASAE

Associations and the tax code

Associations are under the nonprofit tax code umbrella, but there’s a lot of diversity within that classification. While associations fall under the nonprofit tax code, nonprofit organizations and associations are not necessarily the same. Nonprofits are mission-focused while associations are member- or industry-focused.

You can typically find associations classified under the 501(c)(6) designation, which is for member-based organizations, but you could also find them under the following: 501(c)(4), 501(c)(7), 501(c)(8), 501(c)(9) and 501(c)(10). You can learn more about the 501 tax code here.

Because nonprofits are tax-exempt, most organizations file an IRS 990 form. This is an annual document that gives the IRS an overview of the organization's activities, governance and detailed financial information. (Source: Intuit TurboTax) These forms are public files and you can access them on online databases like GuideStar and ProPublica.

Types of Associations

There are three types of associations:

  • Professional - a group of people all in the same profession, formed usually to control entry into the profession, maintain standards and represent the profession in discussions with other bodies. Professional associations work to improve the profession that they represent and connect people that work within that profession.
  • Trade - an organization or group that is funded by businesses in a particular industry. A trade association works to provide different learning opportunities within the industry they promote.
  • Social - these associations are formed by members who have a common bond or interest, ideology or personal background. These associations connect people within the community they live and serve in. 

Professional Associations

A professional association, also known as a professional organization or professional society, is made up of individuals with a common profession or subject knowledge, like law, medicine or finance, just to name a few. Professional associations can range in size, from smaller regional organizations, like Project Management Institute Central Florida, to national organizations like the American Bar Association.  

Professional associations work to improve the profession that they represent by advocating for the profession and its members by promoting the profession, providing professional development opportunities to advance the profession and providing its members with networking opportunities. For example, The American Dental Association exists to power the profession of dentistry and to assist its members in advancing the overall oral health of their patients. 

Trade Associations

Trade associations are organizations of business competitors structured to assist their members and the industry in such areas as standardization, lobbying, research, product promotion, business ethics, personnel and public relations. (Source: Association Forum) These associations are made up of a group of people who work together to advance the industry. The American Egg Board is a trade association with the mission to support America’s egg farmers and increase demand for eggs and egg products. This trade association is funded by its members, farmers, and the funds directly support the marketing of the national category-level egg marketing. Another example is the National Association of Realtors, the largest trade association in America. Along with advocating and protecting home buyers and sellers, this association provides its members with different skills and services for their members to increase their own knowledge. 

Like professional associations, trade associations provide opportunities for professional development and networking. A difference is that trade association members are the organization or the industry, not individual people. Trade associations also work to advocate for advancement in the industry through lobbying government agencies on the local, state and federal level. 

Important fact: Regardless of the association type, they all serve and provide their members with continuing education, advocacy and support for the profession or industry. 

Social Organizations

Social organizations make up the smallest segment of the association landscape. These associations include groups of enthusiasts, fraternal and social organizations. For example, Daughters of the American Revolution and local chapters for the Association of Junior Leagues International, Inc. fall under this category. The members of these associations work to support their community through education, social gatherings and volunteer efforts. 

Interesting Fact: Some nonprofit organizations have members and membership opportunities, but that doesn’t change their classification to an association, even if the word “association” is in the name. A nonprofit organization is a charitable organization with a specific mission focus. For example, The New Orleans Ballet Association has membership opportunities, but the members provide monetary support for the nonprofit and do not receive any professional development opportunities. In short, you do not have to practice ballet to be a member of this organization and support its cause.