Anyone start a local tri club?

GMAN 19030

Myself, former EN member David Scholl, and a couple others have started a local tri club for the Northwest Houston 'burbs.  Has anyone started a tri club?  I'm wondering about the financial/tax implications [501(c)3 vs 501(c)7].  Did you get a TIN/FEIN (I assume it's necessary to open the bank account)? Things you would have done differently?

Mucho gracias!

kurshing

I would think that forming an LLC and having waivers signed (and drafted by qualified legal council) would suffice. Then distribute all proceeds to charity or back to the members, or hold them in a general account for the use of the tri club through board vote. I don't know that you need to go through the reporting efforts and the tax-filing efforts of forming a 501(c)3.

I am part of a local tri club and can have the two that started it email you so you can pick their brains if you want...we have about 175 members in the area and have been up and running for probably 7-8 years or so...so, well established.

jburbatt

I think Barb Spitler started her local tri club in northwest IN. Might be worthwhile to PM her for info.

Barbara Spitler

Bob, I am a director on the board of NWI Triathletes. I will email our Pres. and Vice Pres. for exact info. on our tax filings. I do know that we cannot be a non-profit entity for 3 years, as the tax laws have changed. Apparently, we have to be up and running for 3 years, in order to declare ourselves not for profit. We do however, put 100% of our funds back into the club. I'll get back to you a.s.a.p.
Thanks for mentioning me Jennifer.

GMAN 19030

Thanks so much.

Spokane_Al

We set our tri club up as a non profit - it was quite a bit of work dealing with the IRS but we feel it was worth it in the long run. I highly recommend that you join USAT as a club and purchase both their liability and their officers and directors policies. I think that these a non negotiable purchases in that it will help protect the assets of those who manage the club.

Those policies will also help you develop club policies on group workouts and whether or not to allow and encourage non members to partake.

GMAN 19030

The USAT stuff is already in process.

We're going to set the club up as an LLC, then get the FEIN and open up business accounts. It's the IRS stuff that makes it complicated. I think we're determined to go the 501(c)3 route.

Spokane_Al

I suspect that setting the club up as an LLC could really complicate matters. As you probably know, an LLC is, by default for tax purposes, a flow through entity with all profits/losses flowing through to the partners. That means that if the LLC chooses the default, that partners are necessary with all the disclosure and other necessary steps, and come tax time someone is going to have to create Schedule K1s for each partner, and perform the requisite filings etc. And of course the partners must wait on filing their own tax returns until they receive their individual LLC Schedule K1.



Schedule K1s tend to be a bit complicated for the club treasurer to deal with as well.  Additionally, if any partners engage a tax professional to complete their tax returns, the addition of a K1, even with very little info, can dramatically increase the cost of those individual tax filings.



And if you engage an attorney at cost to establish the LLC, none of this stuff is cheap.

I suggest caution and substantial research before implimenting your club structure.

Larry Pfeffer

Al is generally correct about the default flow through status of an LLC; however, you generally have the choice of how you want an LLC to be taxed under US law. You can file a Form 8832 with the IRS within a certain period of time (generally 75 days after formation) and make a "check the box" election to be taxed as a corporation. You do need an EIN to make the election though. While I am a tax professional, I know very little about 501 entities (just not what I do so take this with a grain of salt) but I suspect you can then apply for 501(c) status with the IRS National Office. Worth looking into / discussing with someone that does this type of work if you want to go the LLC route.

This document was not intended or written to be used, and it cannot be used, for the purpose of avoiding U.S. federal, state or local tax penalties. [Required by the IRS given what I do!]

Nemo Brauch

I actually just researched this as we had a local "club" here without any structure which was a real mess. The club was taking membership dues but had no by-laws or proper governance for what they were doing with those dues. Additionally, there was no insurance for the club or it's directors (no wonder no one wanted to be president). The USAT site has a lot of helpful information but it can be a little challenging to sift through. Below were the basic steps I gave to the club as what we needed to do if we wanted to stay an official club.

Non-Profit Status:
In our case, we already had an EIN#, so that part was done. Next steps were to submit bylaws and other paperwork to the State for NC State approvals. Once we got State Approval the paperwork could be submitted to the Feds for approvals. HIGHLY recommend you see if there is a local "Community Foundation" agency or department that can help to guide you through this process. Those folks are there to help people establish charity organizations and can be a life saver in navigating the forms!

USA Triathlon Club Status:
Getting set up as USAT Club is fairly easy, but the Non-Profit status is a pre-requisit.

Insurance
Both Non-Profit status and USAT Club Membership were pre-requisits for this item. The process to obtain the insurance once you have the club structure all set up is pretty strait forward- but there is a little bit of chicken & egg game you have to play with regards to submitting a membership list. Highly recommend you request copies of the actual policies so you clearly understand what is and is not covered. (contact info on the USAT site).

In our case, we opted to shut down the "club" and donated all the membership fees to a local charity that we all agreed on. Basically, we're such a small community and all the administrative work to keep the club running just overwhelmed folks and made it seem harder to just do stuff together. So we still ordered matching singlets and train together as a social group- but there's no membership fees or annual elections.

Good Luck!

Barbara Spitler

Nemo, thanks for providing that info. for Bob. Our club is a USAT club as well, and we had to follow their protocol. Bob, I apologize that I haven't gotten back to you on this. I emailed our Pres. and Secretary immediately after I posted to you, and I am frustrated to say that neither of them have yet answered me...Our secretary was the one who handled all of the tax implications. I hope all goes smoothly for you with your club. Although we have everything properly set, there has been nothing but drama in our club since it's inception...I hate drama, have stayed out of it, but egos get in the way and it is hard to get things accomplished when that happens.
Best of luck to you. It truly can be a fun endeavor! My reason for being involved in the creation of our club, was primarily to help newbies to triathlon, with training, and comraderie. I enjoy that part the most.