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Thread: How to set up a bank account for your team?

  1. #11
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    It is not my intention to register my team as an independent 501c3.

    All I'm trying to do is set up a bank account at the bank who gives free checking accounts to non-profit organizations like the N-SSA.

    I don't understand how the N-SSA is set up, and I don't know the ins and outs of 501c3 corporations. but I assumed that all teams are operating under the auspices of the N-SSA inc. We function under their rules and bylaws. This is what covers us under their insurance.

    This is the same way the SCA operates. I'm pretty sure this is why all the bank accounts for SCA chapters are actually dba accounts under the SCA inc, as otherwise they would have had to incorporate in every state where there are chapters. This is how I expected N-SSA finances to work also. But in the SCA we always had to do quarterly and annual financial reports that rolled up to corporate. I've never heard of that with the N-SSA.

    I honestly don't know legally how teams relate to the N-SSA Inc. I don't know legally how team money is separated from the N-SSA inc.'s money.

    But like I said, all I'm trying to do is set up a free checking account under the auspices of participating in a non-profit organization. To do that, the bank wants an taxpayer ID number for the non-profit organization.

    Steve

  2. #12
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    This discussion has gotten me curious about how non-profits are structured. What a can of worms!

    I found this:

    http://charitylawyerblog.com/2011/02...ofit-chapters/

    This is also particularly interesting:

    http://www.ashe.org/chapters/pdfs/ag...oedert_pub.pdf

    Basically, as I understand the above, if the parent organization handles accounts for the finances of the member organizations, then they are not legal entities themselves. I don't think we do that in the N-SSA. However, if member organizations do not have the parent organization handle their financial accounting as part of the parent, then the member organizations are required to do this themselves. Also just because the parent organization does not account for member organization finances does not mean that they are or will be considered separate legal entities.

    Further, if member organizations are separate legal entities, they can either be incorporated or not. If they are, then the member organization is responsible for the debts and other legal obligations of the member organization. If not, the individual members are.

    I can see this being an issue if, for example, a lawsuit is brought forth against a team for some reason. To quote from the above PDF:

    This is an extremely important distinction. A plaintiff suing an unincorporated association will also name each of the members individually and, if the plaintiff wins, the plaintiff will be entitled to look to the personal assets (houses, cars, bank accounts, etc.) of the individual members for recompense. Many knowledgeable people decline to become members of unincorporated associations for this reason. The liability for which members can be responsible includes more than contractual liability. Members could also be liable for tort liability and dram shop liability. This means that if someone slips and falls at a chapter meeting, or if too much alcohol is served and an accident ensues, the injured party could sue the unincorporated association and obtain a judgment which would be collectible from the individual members if the chapter has insufficient assets or if insurance coverage is
    not in place.


    As the new commander of this team, this is particularly eyebrow-raising to me. It means that if teams are considered separate legal entities not under the protection of the parent organization in terms of liability, then there is a very good reason to incorporate your team as it provides asset protection for the officers of the team who would otherwise be risking their personal assets as officers of a separate legal entity.

    It's not clear to me, however, that teams are separate legal entities.

    Sections 9 and 10 and 11 of the above PDF document are also very interesting:

    9. WHAT IS THE FEDERAL TAX STATUS OF A CHAPTER?
    If a chapter is included in the same legal entity as the parent, it is automatically covered by the
    parentís federal tax exemption. If the chapter is a separate legal entity, it must have its own tax
    status. It can obtain tax-exempt status in one of two ways. First, it can file its own Application
    For Recognition of Tax-Exempt Status with the IRS. Alternatively, a parent organization can file a
    group exemption request with the IRS to obtain tax-exempt status for all of its chapters.

    10. WHAT IS A GROUP EXEMPTION?
    A group exemption is a ruling or determination issued to a parent organization recognizing on a
    group basis the federal tax exemption of its chapters. To be included in a group exemption, the
    chapters need not be incorporated, but they must each have an organizing document, such as a
    chapter charter. Even if it is not incorporated, each chapter included in the group exemption must
    have its own employer identification number.

    An application for group exemption consists of a letter signed by an officer of the parent association
    which confirms to the IRS that the chapters are affiliated with the parent, describes their purposes
    and activities, includes a sample copy of a uniform governing instrument, such as a charter
    or articles of incorporation, and includes several other items of information. The group exemption
    process is relatively simple compared to other IRS filings.

    Most importantly, a group exemption is separate from the parentís own tax exemption. This means
    that if the chapters engage in activity which results in the revocation of their own tax-exempt status,
    the tax-exempt status of the parent is not necessarily effected.

    11. WHAT ARE THE PARENTíS CONTINUING OBLIGATIONS IF IT OBTAINS
    A GROUP EXEMPTION FOR ITS CHAPTERS?
    To maintain a group exemption for its chapters, a parent organization must update the IRS once
    a year on any changes in the purposes, character, or method of operation of the chapters, and the
    names, addresses, and employer identification numbers of chapters that have been added or terminated
    during the year.

    A parent organization may, but need not, file a group form of annual information return (Form 990)
    with the Internal Revenue Service for chapters included in the group exemption. The group return
    would be separate from, and in addition to, the parent's own annual information return. If the parent
    organization prefers, it can require each chapter to file its own information return. This means
    that, even if a parent organization obtains a group exemption for its chapters, it is under no obligation
    to gather and report information on chapter income and expenses to the IRS. Those chapters
    with gross receipts equal to or less than $50,000 may file an abbreviated 990N, an "e-postcard",
    online with the IRS or the parent can file this form on behalf of the chapter. The chapter may also
    file its own annual information return with the IRS.
    So, if teams are not separate legal entities, then we would use the taxpayer ID of the N-SSA. If we are separate legal entities, then we can either incorporate and get a taxpayer ID that way, or we can get a group exemption (if the groups are not already exempted) and then we have to get our own EIN number for our team.

    So, the question is, are N-SSA teams separate legal entities, and if so, do we have group exemption for them with the IRS?

    Steve



  3. #13
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    Chris
    That was my point.
    there is nothing to gain lots of time and money lost.


    Back to the thought about using the 501c3 of the NSSA

    If you did and someone donated say 100$ you would need to send it to the NSSA not have the team keep it.
    MR. GADGET
    NRA LIFE BENEFACTOR MEMBER
    Rowan Artillery


    Just remember!
    When a pot needs stirring, someone needs to do it...

  4. #14
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    I think this may be the key:

    It is not always easy to tell whether a chapter is or is not included in the same legal entity as the parent. If a chapter is separately incorporated, the question is easily answered. Incorporation always establishes a chapter as a separate legal entity. If a chapter is not incorporated, however, the next place to look for a clue is on the parent associationís annual information return filed with the IRS. Are the items of income and expense attributable to the chapters included with the items of income and expense attributable to the parent? If they are, and if the information return is not filed on a ďconsolidatedĒ basis, then the parent association is treating the chapters as being included in the same legal entity as the parent. If the items of income and expense of the chapters are not included in the parentís information return, then the parent is treating the chapters for tax purposes as separate legal entities.
    I am not aware of any reporting of team finances to either the Region or National organization, so presumably our income and expenses are not included in the N-SSA's tax return. Thus the N-SSA is treating teams as separate legal entities.

    Since we appear to be a separate legal entity, and we are not incorporated, then we appear to be an "Unincorporated Association".

    So, the final question seems to be, is do the member organizations (teams) of the N-SSA have Group Exemption from the IRS as part of the N-SSA Inc.?

    If so, then we can obtain an EIN on behalf of our team as a non-profit Unincorporated Association Member Organization.

    If not, we would have to apply for non-profit recognition from the IRS in order to be considered a non-profit organization ourselves.

    Clear as mud?

    Steve

  5. #15
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    OK I went and took out an EIN number for our team.

    I suspect this will be sufficient for the bank.

    Steve

  6. #16
    Chris Sweeney is offline
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    For starters, everyone in this organization, especially team commanders, needs to be familiar with the Bylaws. There you will discover that units are not chapters; they are members of the organization. You are the member of a team; the team is a member of the NSSA. that is why it's the team commanders who vote on everything, and not the membership at large.
    Chris Sweeney
    Commander, 44th NYVI

  7. #17
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    I'm not sure that what you call member organizations matters much. From what I am understanding, mostly it comes down to "does the parent organization report the income and expenses of member organizations?" If the answer is no, then for tax purposes the parent organization is acting as a separate legal entity separate from the member organizations. I don't think N-SSA teams report their financials to the N-SSA inc., (at least, I don't think we never have) and so that seems to me to indicate that for taxation purposes N-SSA teams probably are separate legal entities.

    So, I went and got an EIN number for my team, and that was good enough for my bank, and now the team has it's own bank account.

    Of course there are more questions that arise out of all of this. As I mentioned above, evidently you can have "group exception" for member organizations that confer the tax exempt status to the groups even if they are separate legal entities. I don't know if that has been done.

    Then, too, there is the question of, "should individual teams be filing appropriate tax documents?"

    Then, too, there is another question of personal liability exposure for members, particularly officers, of teams and regions.

    But, at least we now have a bank account.

    Steve

  8. #18
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    Also one thing is that not being a team that is a 501c3 the money given to the team is not tax deductible.
    Teams can also run into problems with fund raisers and can be on the wrong side of the IRS or State if someone donates to a team as a tax deductible amount and recorded it on the taxes.
    MR. GADGET
    NRA LIFE BENEFACTOR MEMBER
    Rowan Artillery


    Just remember!
    When a pot needs stirring, someone needs to do it...

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