trioval00

My Feedback: (17)

by posting this i am hoping to get some helpfull advice, a little history first, we have been flying at this field for about 30 years now. a few years ago, the club that was there moved, there for - a new club was formed, mostly the same members, just new officers. here is where i need some info, the old club was incorporated, the new club , which is about 3 years old, has been discussing the issue about getting inc. we were just about ready to sign the papers and get them filled, when a few of the officers feel there is no need to be inc. as for the rest of the club, most of the club members feel it should.

How do other clubs operate? do you have incorperation to protect your members from something that might happen? does AMA have enough coverage to fully cover the chartered club?

bottom line, is it realy important to get incorerated? or NOT???????
maybe some one who knows, can shed some light on this


thanks for the help

mark

rc-sport

My Feedback: (12)

Get Incorporated, if something should happen that would bring a law suit on the club the officers are liable. Once you are Inc as a not for profit corporation you can apply for tax exemption. The AMA website has a ton of info on this subject and how to go about it.

trioval00

My Feedback: (17)

rc_sport, we have been thru the ama web site and they seem to claim , the clubs do not need to inc. with the insurance policy they have.

mark

dant-RCU

My Feedback: (3)

You might want to read these posts in RCU on this subject:

http://www.rcuniverse.com/forum/m_52.../tm.htm#528286

http://www.rcuniverse.com/forum/m_77.../tm.htm#773601

Dan

rc-sport

My Feedback: (12)

Mark, here in Illinois the initial fee for Inc is $60.00 then $5 a year to maintain your status, I think its a small price to pay for the additional benefits. Tell your current officers that if a lawsuit is filed they are responsible if not Inc and see if the re-up for the following year, or if any one volunteers for future positions.

dant-RCU

My Feedback: (3)

I clipped this from an earlier post of mine for added perspective.

"There are some additional advantages to incorporation other than the limited liability aspect but those would depend upon the direction a club was taking.

My club was incorporated (201(c)(7)) when it was formed in the early '80's and that was before I joined. I do not remember it ever being a problem when we leased land however.

When we decided to purchase our own land it was a necessity to be a "legal entity" such as a corporation, company, partnership, etc. and not a loose collection of people. In addition, three years ago we got tired of spending $4,000 to $4,500 yearly to have our facility commercially mowed so we got a bank loan for a commercial mower. Again, in order to get the loan as a club we had to be a "legal entity". Banks (and mortgage companies) in our case wanted this plus they need to see who is legally responsible to sign for the club. As such, we (as a club) have a bank relationship and a credit history (and rating). We also carry comprehensive and property damage insurance on our facility and it was easier to get reasonable quotes being a corporation (at least that is what we were told when soliciting bids).

Our club annual income has varied from $10,500 to $16,000 and we do not have any income tax liabilities nor are we subject to any. Our club membership varies between 100 and 125.

We also found it easier when dealing with utility companies and local government being a corporation.

Perhaps, being a corporation (or "legal entity" of any kind) gives the PERCEPTION of being more stable than just a loose collection of people. In any event, whatever it cost us to incorporate at the time has been worth it to us.

Probably as has been mentioned here incorporation does not fit everyone. I wonder how many chartered AMA clubs are actually incorporated?? "


Dan

FLYBOY

My Feedback: (11)

Get yourself 501 C(3) status and when people donate stuff to you, like the use of the field, they can write it off. Puts you in a better position if you ever loose the field and need to find a new one. Protects the members and board members better too. Doesn't cost much, is very easy, and there are many bennies. If someone has an accident and the club gets sued, they can go after any and all members. They usually start with the guys with money.

Goinstraightup

My Feedback: (26)

I did all the footwork to inc. our club 2 years ago. It was a bit of work, but no one was going to be an officer if we didn't have it. I still think we came out very good at under $200 in lawyer fees. Do your homework to keep the fees down. If you don't have good bylaws and all the other related stuff, then prepare to pay to have that done. I'm glad its all done with.

dant-RCU

My Feedback: (3)

Flyboy:

Not so sure I agree with your statement that doesn't cost much and is easy. Hey, if it is would you share how you did it with the rest of us??

Since our club now has somewhere in the vicinity of $75,000 in assets I looked into changing from a 501 C(7) to a 501 C(3) and here is what I found (a year and a half ago):

According to the IRS, in order to be even considered (no guaranties here) for 501 C(3) status, you must first meet the following:

"For the IRS, a 501(c)(3) organization is one that operates for one of the following purposes: religious, educational, charitable, scientific, literary, testing for public safety, fostering amateur sports competition, or preventing cruelty to animals or children.

Also, a nonprofit does not exist solely for the benefit of its members, or solely to distribute profits to their members.

Finally, a nonprofit cannot exist primarily to influence legislation. If you are unsure, talk with a tax law expert about whether or not your group meets these criteria. "

You will first need to be incorporated in your home state. Then you need IRS Forms 1023, SS-4 and 8718 plus Publication 557.

You will need to provide a DETAILED fund raising plan and organizational structure. You will need, at a MINIMUM, a three year budget plan which includes the current tax year plus the future 2 plus a complete description of all activities current and planned. You need to submit copies of your state Articles of Incorporation and your Bylaws. In addition to listing your Board of Directors, you also need to provide a description of how your Board of Directors represents the community as a whole. (go figure that one!). You will need to provide current copies of your organizations publication(s) which you are required to have.

Should you be granted C(3) status, you will be required to file annual returns that outline compliance with your budgets/plans and the IRS rules of tax exempt status. You will need to file continual updates on various items to maintain your C(3) exemption. You will (CPA item here) be subject to random audits from time to time to insure compliance.

Then there are the costs. The IRS charges a NON-REFUNDABLE application fee that depends on your provided budget plan. Not sure what the numbers are here but in our case we had figured it would be somewhere around $500.00. Plus lawyer fees and we were quoted a "ball park" of $1,200.00 - $1,500.00 UNLESS there were compliance problems/questions with the IRS that needed to be "ironed out".

We decided not to pursue.

Again, if there is an easy and inexpensive method to achieve C(3) status I am sure many of us would like to know. Even the AMA in their own Publication on Insurance and Incorporation 509 stated that it is a very large undertaking and AMA attorneys expended a considerable amount of work to document the AMA position with regards to C(3) status.

My dime here... y'all keep the change..

Dan

FLYBOY

My Feedback: (11)

Dan, guess I wasn't thinking about that. The 2 we did as C(3) were a museum and an EAA chapter that does a lot of free kids camps and stuff. The RC club is not a C(3). That would be a stretch. Forgot about the specific rules. Just do the RC club as a not for profit and it isn't bad. We did the EAA chapter for under $100, and the RC club has been so long ago, I don't remember what it cost. I did my construction companies paperwork a couple years ago by myself without a lawyer for under $100 too.

The club stuff is easy if you have good bylaws written. The ama site gives good ones to use as a foundation, and they also tell you where to get the paper work for the not for profit status. Seems to me when we did the EAA chapter, we had to go back and forth a couple times with them to get all the paper work they needed, but it wasn't hard. Just takes time.

Goinstraightup

My Feedback: (26)

Dan,

Our club made the same decision as yours.

As if the things you mentioned were'nt enough, there's also these points:

You have to have in your by-laws that any assets your club possesses must be transferred to another non-profit organization if your club ever disbands.

You have to have a legal document (usually a lease) with your landowner. If you own your flying field this is not a problem. We have a private land owner that we rent from, but getting a lease from them works out better for the club than the land owner. A lease for them is just like a bank having a lien on the property and does not give them a clear title. We did not want to upset our land owners. This was our main reason for not considering C (3).



We did have our app in for C (7) though, and I got a LOT of questions from a nice gentleman from the IRS.

Whatever you do, make sure you have all your homework done and rechecked before you even start applications.


I also would like to hear if any RC clubs are C (3). I think the AMA is C (3)?

FLYBOY

My Feedback: (11)

If the AMA is a C(3), they would have probably done it on the educational aspect of RC. I don't know what they are for sure though.

dant-RCU

My Feedback: (3)

Yes, the AMA is C(3) under the educational banner I believe. Probably helps that they give the annual scholorships and part of their vision and mission statements contains the words "educational" and "scientific development".

Dan

edit here:

As I remember (my memory may not be the greatest) a part of a lifetime membership is also tax deductable as are donations to the AMA museum.