Legal issues: Club Incorporation and Insurance

[bonjour-user]

Earlier this year our club (Beer Barons of Milwaukee) wrapped up our incorporation project.  This project consisted of becoming incorporated, registering as a non for profit organization, and obtaining insurance.  Each of these steps yielded their own benefits but in the end they were all necessary in order for us to obtain the insurance coverage we now have.

The first step was to incorporate as a non-stock cooperative with the State of Wisconsin.  This was completed in August of 2008 and the club is legally known as the Beer Barons of Milwaukee Cooperative.  This step gained the club two advantages.  First, it protects the club Officers and Event Leaders from being sued in the event of some kind of unfortunate incident.  Prior to becoming an LLC if something happened each Officer or possibly Event Leader could be sued individually.  Now that we’re an LLC, in the event of a law suit, an individual would name the club in the suit, not individual members.  On the flip side, the second thing that incorporation gains the club is the ability for the club to take legal action against an individual or another corporation.  So in the event of fraud or a contract dispute, current club Officers can initiate legal action and future club Officers can see it through to the end.  Prior to incorporation if legal action was required the current club Officers would have to initiate it and see it through to the end (which could be many years after they leave office).

The second step in the project was to register with the Internal Revenue Service as a non for profit organization.  This step was taken so the club would not be required to pay federal and state income taxes for the educational services and charitable contributions that are provided from the fees that are collected.  In December of 2009 the Barons were approved by the IRS as a 501 (c) (7) organization, which means non for profit social club.  It’s important to note that in order to register with the IRS we had to submit a copy of our constitution, by-laws, and non-discrimination statement.  Here is a link to the Barons for those that might like an example → http://beerbarons.org/about/constitution.html

The third step was to obtain the necessary insurance for the club.  We already had a special single event policy for the beer festival we hold each June (www.worldofbeerfestival.com), but we didn’t have anything for our monthly club meetings, our Brew-U classes, or club board members.  Since we were now a non for profit organization we were able to obtain a policy that covers all of our events, loss of property, and liability for our board members.  It’s important to note that in order to obtain this insurance coverage we had to be registered as a non for profit organization.  I’ve emailed the details of our insurance coverage to Chris outside of this thread along with the name of our insurance agent for follow up.

The incorporation effort also investigated taking a fourth step, the possibility of seeking sales tax exemption; however that would have required the club to pursue a Public Charities and Private Foundation status.  While the club does provide some nice sized charitable efforts at this time, the amount of charitable effort required to achieve this status would greatly change the way the club operates today.

Hope this helps.

Mod edit “incorporate as a non-stock cooperative with the State of Wisconsin”

[fermented]

Great information. Thank you Fred!

[bonjour-user]

Don’t thank me, thank Crispy, he did all the legwork.

I figure I’d let the club committee figure how they wanted to put it on the website,  the forum is covered.

Fred

[fermented]

Don’t thank me, thank Crispy, he did all the legwork.

I figure I’d let the club committee figure how they wanted to put it on the website,  the forum is covered.

Fred

Alright - Thank you Crispy!

[system]

I’m guessing this might be out of the realm for small clubs.

This does provide some food for thought about having beer at meetings or pouring homebrew at beerfests.

Thanks for providing this.

[bbuerger (Bruce B)]

The first step was to register with the State of Wisconsin as a Limited Liability Corporation (LLC).

I messed up with this statement.  We actually incorporated as a non-stock cooperative with the State of Wisconsin.  My apologies.

mod edit - corrected in the above post

[norm]

It’s really a shame that we or any homebrew or beer club has the need to hire a legal team to protect itself and it’s individual participants from a law suit, I’ve had a couple beers to relax tonight (so forgive me if you cannot easily follow)  and even reading the above post just wears me out, I’m sure I would have a headache if I were ever involved in such litigation. I guess what I’m saying is folks in our country/community’s need to quit looking to blame the other human. I say that participation alone in any event should wave litigation, it’s your choice, live with it.

[timberati]

@norm

It’s really a shame that we or any homebrew or beer club has the need to hire a legal team to protect itself and it’s individual participants from a law suit, I’ve had a couple beers to relax tonight (so forgive me if you cannot easily follow)  and even reading the above post just wears me out, I’m sure I would have a headache if I were ever involved in such litigation. I guess what I’m saying is folks in our country/community’s need to quit looking to blame the other human. I say that participation alone in any event should wave litigation, it’s your choice, live with it.

I mostly agree (how could I not with another named Norm–the standard?). Yet, we (the jurors, that is, those people who represent us) reward the plaintiffs, perhaps out of pity. In a previous life I worked for the government (aka Deep Pockets). During my time, a newlywed couple hiked up to Morro Rock in Sequoia Nat’l Park during a lightning storm (hiking to a high place in a lightning storm is unwise to begin with) and held the metal hand rail. Lightning struck the metal handrail and killed one of the couple. The surviving spouse sued the Park Service for negligence for not having warning signs saying you shouldn’t hold metal in a lightning storm…and won. I feel for the survivor. But, some knowledge of physics should be taken for granted.

[tschmidlin]

I want to reiterate a point that came up a few times at the panel discussion in San Diego.

The most important thing is for you to be aware of the laws that apply in your location.  Different states, possibly counties or cities, will have different regulations that you need to keep tabs on.  What works for one locale will not necessarily work in another, there is no cookie-cutter solution.  One club in my area incorporated as a 501(C)3 to protect the officers, while my club got event insurance that covers us for a year for only $650.

You can get help, but ultimately you’ve got to work it out for yourselves.

[bonjour-user]

My club CRAFT has just incorporated in Michigan.  LLC is NOT a good way to go in Michigan, but is the BEST way to go in some states.
First lesson learned.
The Laws in each State are DIFFERENT.  What is best in one State, is NOT the best in another.

[bbuerger (Bruce B)]

I should note that I made a correction to my earlier post that didn’t make it with the copy over to this thread.  We actually formed as a non stock cooperative, not an LLC.  My apologies.

[bbuerger (Bruce B)]

@tschmidlin

I want to reiterate a point that came up a few times at the panel discussion in San Diego.

The most important thing is for you to be aware of the laws that apply in your location.  Different states, possibly counties or cities, will have different regulations that you need to keep tabs on.  What works for one locale will not necessarily work in another, there is no cookie-cutter solution.  One club in my area incorporated as a 501(C)3 to protect the officers, while my club got event insurance that covers us for a year for only $650.

You can get help, but ultimately you’ve got to work it out for yourselves.

I’d like to add a bit to this based on legal issues we’re now seeing in a few states like OH and WI.  Once a club has incorporated stay on top of it and re-evaluate from time to time.  Make sure your current incorporation status gives you the most benefit.  Interpretations can change.  Incorporation isn’t a one time set up and done.

[tschmidlin]

@tschmidlin

I want to reiterate a point that came up a few times at the panel discussion in San Diego.

The most important thing is for you to be aware of the laws that apply in your location.  Different states, possibly counties or cities, will have different regulations that you need to keep tabs on.  What works for one locale will not necessarily work in another, there is no cookie-cutter solution.  One club in my area incorporated as a 501(C)3 to protect the officers, while my club got event insurance that covers us for a year for only $650.

You can get help, but ultimately you’ve got to work it out for yourselves.

I’d like to add a bit to this based on legal issues we’re now seeing in a few states like OH and WI.  Once a club has incorporated stay on top of it and re-evaluate from time to time.  Make sure your current incorporation status gives you the most benefit.  Interpretations can change.  Incorporation isn’t a one time set up and done.

Yeah, that goes for all of the laws and rules we operate under.  Oregon banned removing homebrew from your house (a change in interpretation of the law, not the law itself), it got a lot of press and homebrewers quickly mobilized and got it changed.  But you’ve got to be paying attention.

[bonjour-user]

I should note that I made a correction to my earlier post that didn’t make it with the copy over to this thread.  We actually formed as a non stock cooperative, not an LLC.  My apologies.

If I missed it in the edit I made, Please let me know where / what to change.  While I rarely do, I can edit any post as a moderator.

[bbuerger (Bruce B)]

After further review - my bad.  Now that I looked closer I see that there is a mod at the end of the original post.  I beg forgiveness and I owe you a beer.

[roxanne]

The following question was sent to Crispy, who also copied me.  I am posting the question & replies here so all can benefit.  We can continue this conversation here.

Question:
I am now the acting treasure of our local club in Memphis TN.  Problem is our checking account has an old members social security number on it.  I assume I need to get a tax ID and set something up more official.  I want to make it so the next treasurer will be easily able to take over the duties.  Near as I can research we are currently an unincorporated association.  At this time do I need to consider setting up a trust to handle the finances of the club?  Club Officers would be the trustees, since as near as I can tell unincorporated associations cant own property (like bank accounts).

Thanks for any advice you can provide

Initial Responses
I am currently treasurer of my club, and I maintain the checking account under my name/social security.  We currently have no officers, and therefore can not incorporate.  I am cc’ing two much more knowledgeable people on this issue, but my thinking is that the old checking account will need to be cashed out, and if the club members agree, either the club needs to incorporate, or will need to continue to start anew with each succeeding treasurer

my Addtional perspective:
A few thoughts.

First - check with your bank to see what is required for an account for an organization IN YOUR STATE.  My guess it that they will need some type of taxpayer ID.  Frankly, I would not want to use this under my personal account and social security number because that could make me a liable person (vs. the club).  I don’t know if this would mean that my personal assets would be at risk if something happened, but I would NOT want to take that chance.

Second - I don’t know much about trusts - but that just doesn’t have the right feel to it.  Again - you need to check your local laws and with your financial institution.

If you have a club taxpayer ID and the account is for the organizaiton - changing the names of those who can write checks & deposit money is usually a pretty simple form (need to keep the mailing address up to date, of course).  A taxpayer ID should take the place of a SS# in bank documents for an organization.

Again - I can’t stress strongly enough that you need to determine what is right for YOUR STATE.  There were some reasons we hired a lawyer to help with ours that go beyond simple paperwork (a very large competition + party, ambiguity in state laws, liability concerns, etc.).  Your bank may be able to provide you with enough of the basics depending upon your state.