Life cycle of a business league (trade association): Starting out


The first stage in the life cycle of any organization is its creation. A nonprofit organization may be created as a corporation, a trust, or an unincorporated association. Any of these entities may qualify for exemption. Note, however, that a partnership generally may not qualify.

To qualify for exemption as a business league under section 501(c)(6) of the Internal Revenue Code, an organization must be an association of persons having a common business interest, whose purpose is to promote the common business interest and not to engage in a regular business of a kind ordinarily carried on for profit. Its activities must be directed to improving business conditions of one or more lines of business rather than performing particular services for individual persons. Further, net earnings do not inure to the benefit of any member.

The organization must have organizing documents. Most organizations also adopt bylaws. It should also apply for an employer identification number, even if it does not have employees.

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