What Is a Business or Trade Association?

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Business and trade associations are mutual assistance organizations that have formed for the purpose of promoting growth and progress in their particular industries by providing a central information source about the industry and its issues, establishing best practices guidelines, lobbying local, state and federal government, and promoting the image of the industry through licensing, membership standards and public service advertising. Some may argue that there is a difference between business associations and trade associations, though the terms are often used interchangeably.

Business Associations

Business associations tend to be open membership organizations that form to provide community charitable support, networking opportunities and general business promotion in a city, state or region. Examples of this type of business association are the state and local Chambers of Commerce, the Better Business Bureau, Rotary Club, Lions Club, Elks Club, and the various business lead generation clubs such as Leads Clubs International.

Trade Associations

If there are differences to be noted between business and trade associations, it would be that trade associations represent certain industries while business associations can be more general in scope. The National Trade and Professional Associations directory estimates that there are more than 7,600 such organizations in the United States. Examples of trade associations that focus on a specific industry or sector of an industry are the American Medical Association, American Bar Association, Trial Lawyers Association, American Bankers Association and Consumer Electronics Association.

Types

Most business and trade associations are not-for-profit corporations, but many are not because they form as informal clubs and do not collect money. The Internet has made it possible for many informal organizations to grow into large groups that can wield considerable power. SFWOW started out as an informal Internet discussion list for women working in new media, San Francisco Women of the Web, and grew into a large-formal, not-for-profit trade association.

Nonprofit Designation

Charitable and religious organizations fall under the 501(c)3 designation, which provides for tax-deductible donations but prohibits the nonprofit organization from lobbying and political activities. Trade associations are usually 501(c)6 organizations. Donations to these nonprofit organizations do not qualify for tax deduction, but the organizations are allowed to lobby and engage in political activities.

History

Forms of trade associations date back to the 1300s and before. They evolved from guilds, which trained and certified the skills of their members, and some evolved into what we now call trade unions. When machines enabled unskilled or semiskilled laborers to turn out products, the division of labor between company owners and their employees became more pronounced and small groups of workers formed what were then known as trade associations. In 1827, in Philadelphia, small trade associations across the city formed into the Mechanics' Union of Trade Associations in order to wield more power in negotiating with company owners. Nowadays, trade associations are more likely to be lobbying for corporate interests, against labor unions.

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