Good point Robert, thanks
Bram and I have discussed this, but more voices (and authoritative opinion) and
a range of opinions are welcomed before we do this.
Many for-profit entities have decided to go that route because there are
restrictions on the activities a club or association can engage in and still
maintain A 501(c)(7) status. For example providing benefits and deriving income
from nonmembers. This might make the mooring leases and dining room at your
yacht club a regulatory problem.
I understand that if our nonprofit is granted tax-exempt status under 501(c)(7)
of the tax code, the corporation will be exempt from payment of federal
corporate income taxes. With federal income tax rates at between 15% to 34%
this can amount to quite a tax savings.
A 501(c)(7) nonprofit is eligible to receive both public and private grants.
Individual donors can claim a federal income tax deduction of up to 50% of
income for donations made to 501(c)(3) groups.
Nonprofits also receive the same limited liability protection as for-profit
companies. This means that directors or trustees, officers, and members are
typically not personally responsible for the negligence, debts and liabilities
of the corporation.
Other benefits include: The corporation's life is not dependent upon its
members. A corporation can possess the feature of unlimited life. If an owner
dies or wishes to sell their interest, the corporation will continue to exist
and do business. ie if Bram headbutts the mast and moves on to a place with
flatter seas and less shifty wind. 501(c)(7) corporations receive lower postal
rates on some bulk mailings which might come in handy.
The main disadvantage of forming a nonprofit company is the increased paperwork
that is required. Articles of incorporation must be filed with the state,
bylaws prepared, and meeting minutes must be kept with your corporation's
records. Also, applications for tax-exempt status must be filed at both the
federal and state levels. Bram is covering the legal service expense of the
submissions.
I think in any case we would prepare Bylaws and take AGM and Executive meeting
minutes. Because we have a high performance skiff, with high speeds and crashes
likely, we do really need to establish a limited liability structure. Articles
of Incorporation are required for such a corporation but in Washington the
requirements are superficial. However, we will need comprehensive and
carefully thought out Articles if we are going to apply for A 501(c)(7) status
because the federal (IRS) regulations are more thorough. Apart from a
treasurer, we may also need an honarary Auditor (who is not a member) if we can
find one. The books of the Association should be fairly simple and low volume
items. As the honarary treasurer of other clubs I have not forund it to be all
that difficult to keep good records (if people cooperate!). I dont think the
record keeping and bookkeeping tasks are that onerus at the moment to stop us
applying to become, certainly an incorporated non profit and also an A
501(c)(7) entity.
Greg
----- Original Message -----
From: Robert Harper
To: 'Greg Ryan'
Sent: Wednesday, April 07, 2004 2:12 PM
Subject: RE: Incorporation Help Please
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but you might look at the increased costs of reporting and accounting
oversight with non profit with the reduced costs in making it a profit corp.
Our yacht club looked at it and the reduced costs for services afforded non
profit corps did not offset the costs of management and reporting.
Just a thought, I will support where you want to go with this.
Robert S. Harper
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