Fraternal Organization: Definition & Overview

KEY TAKEAWAYS

• A fraternal organization is a social club or membership group. It is created around a shared interest, philosophy, or history.
• Fraternal organizations offer members deep networks. This includes social events, leadership development, and continuous education.
• Fraternal organizations frequently receive advantageous tax treatment as 501(c)10 organizations.
• They provide their members discounts on life and health insurance, among other advantages.

What Is a Fraternal Organization?

A fraternal organization is a type of social group. The members come together for mutually advantageous reasons. Such as ethical, moral, or professional standards. The word fraternal comes from the Latin word frater, which means brother.

How Fraternal Organizations Work

Fraternal organizations are associations that were created based on shared interests or common goals. Such as those in academia or the social world. Examples include college fraternities that are founded on a particular religion. These groups may offer fantastic networking possibilities. This enables graduates to enter the workforce more easily.

Fraternal organizations like the Freemasons are common instances of trade guilds. These are made up of professionals from a particular trade. And were the forerunners of trade unions. In addition to the founding ideal, many organizations also engage in philanthropic endeavors.

Section 501(c) of the Internal Revenue Code allows for possible tax exemptions. To qualify, the group must have been founded on a shared bond or fraternal purpose. As well as offer a sizable program of activities. In order to be exempt under IRC 501(c)(10) it must also allocate its earnings exclusively to religious, charitable, scientific, literary, education, and fraternal purposes.

The organization must function under the lodge system. This necessitates the presence of at least two active organizations including the parent organization and a subordinate branch. Both self-governance and parent organization chartering are requirements for a branch.

How Fraternal Organizations Are Established

Fraternal organizations have existed since early in the development of society. And with time, their purpose and role have changed. Some of the first fraternal organizations were founded on religious principles. These promoted unity and solidarity among the group’s members. 

Many fraternal organizations still admit only men or only women as members (the idea of brotherhood or sisterhood fraternities). However, membership is not always gender-specific.

Types of Fraternal Organizations

Fraternal associations are established for charitable, religious, social, and economic reasons. 

There are three categories. Service clubs, fraternal benefit societies (many of which serve as insurance firms), and secret orders such as lodges.

The majority of the members of lodges and other secret orders are men. The Shriners, Odd Fellows, and Masons do not allow women to join. However, a handful of women’s societies connected to certain lodges do exist, such as Freemasonry for Women.

Summary

A fraternal organization or fraternal society is a form of organization. The members voluntarily band together for a common goal, such as adherence to ethical, moral, or professional standards. They also meet up for social activities.

Domestic fraternal organizations may also qualify for exemption under Internal Revenue Code 501(c)(10). This is if they meet a number of requirements. An exempt organization is prohibited from paying benefits to its members, in the event of an injury, disease, or other calamities. It may, however, arrange with an insurance company to provide optional insurance to its members.

Written by Sandra Habiger, CPA

Sandra Habiger is a Chartered Professional Accountant with a Bachelor’s Degree in Business Administration from the University of Washington. Sandra’s areas of focus include advising real estate agents, brokers, and investors. She supports small businesses in growing to their first six figures and beyond. Alongside her accounting practice, Sandra is a Money and Life Coach for women in business.

Written by Sandra Habiger, CPA

Sandra Habiger is a Chartered Professional Accountant with a Bachelor’s Degree in Business Administration from the University of Washington. Sandra’s areas of focus include advising real estate agents, brokers, and investors. She supports small businesses in growing to their first six figures and beyond. Alongside her accounting practice, Sandra is a Money and Life Coach for women in business.