Setting up a non-profit youth sports club

[You don't know me 1161]

Hopefully there is someone on here that has done this before.  We recently started a youth wrestling club in town.  I have registered the name with the state, got an EIN from the IRS and opened a bank account.  I have also registered the club with AAU.  My concern, however, is how to proceed.  Do I need to register as a non-profit somehow?  Also, how can I be certain that board members' personal assets will be protected if something were to happen? 

[Nivek 16987]

Do you own a white van with free candy printed on it?

[You don't know me 1161]

Not yet.

 

Edit to add:

I fully expected something similar to this as the first response, so kudos to you.  What I should probably say is that we are working closely with the high school wrestling program.  We're in Missouri, where high school wrestling is kind of a big deal, not quite to the same level as Iowa, but more so than when I left Texas.  The very successful high school programs up here have very strong youth programs, which is why we are doing this.  Good intentions, all that.

Edited October 7, 2021 by You don't know me

[txhorns 2413]

You need to make some commercials staring Fred McGriff.

[txhorns 2413]

18 minutes ago, You don't know me said:

Hopefully there is someone on here that has done this before.  We recently started a youth wrestling club in town.  I have registered the name with the state, got an EIN from the IRS and opened a bank account.  I have also registered the club with AAU.  My concern, however, is how to proceed.  Do I need to register as a non-profit somehow?  Also, how can I be certain that board members' personal assets will be protected if something were to happen? 

Hire a lawyer so that you know it is done right.  Likely someone involved is a lawyer or has good connections with a lawyer.  This is what I did when redoing my local little league baseball organization.  A lawyer in town did it for free for me while he wrote it off for tax purposes.

[TwiceHorn 31539]

Generally speaking, you probably do want a legal entity, probably an LLC so that you can separate your (and any other individuals involved) affairs from those of the organization, in accounting, taxation and other regards.  Otherwise, the accounting is basically inseparable from you.

The entity will also give you some protection for individual liability for lawsuits, as long as you are able to conduct business solely in the name of the entity (that is,without personal guarantees on loans or credit cards, etc.).  To the extent possible, you want to negotiate and contract with third parties of all kinds in the name of the entity, as opposed to any of you personally.

You will then elect an appropriate tax exempt status for your entity.  https://www.irs.gov/charities-non-profits/types-of-tax-exempt-organizations

Get a lawyer is good advice.  @troph does this at a high level, or did and can help or provide a referral.

 

Edited October 7, 2021 by TwiceHorn

[troph 24911]

I don’t do a lot of tax exempt work anymore, what I did do was usually down the middle (c)(3) hospital or clear charitable work. Nothing on the fringes. Dabbled in private foundations early in my career that’s high stress work. Anyway, should be straight forward, non-profit corps were my preferred vehicle, self-perpetuating board. I don’t have experience with youth leagues they should be (c)(3) as they qualify under 501(a) and then should meet the revenue tests to be a public charity (what (c)(3) means) based on dues paid by families. I’d expect youth leagues are membership based so the board is elected by the members. Best way to do this is find a lawyer with an interest in your league who is at least a business lawyer and have them help with paper work. Go grab the public documents from the SOS for a league you think is run reasonably well or league itself (website or email them) and use those as a go by. 

[You don't know me 1161]

Hoping for an attorney to register their kid on Sunday.  If not, then I'll be calling around town for someone really nice and willing to help us out.

[dcbc 14511]

Yes, to get a lawyer.

Setting up as a Corp or LLC is the best bet.  Filing for federal nonprofit status is a separate endeavor.  In Texas, you just filed a card once per year verifying that you didn't bring in money over a set amount.  And you file a tax return until tax exempt status is achieved, after which point, there's a postcard you send in.  Once it's set up, then, it's mostly a matter of doing everything in the entity's names, having at least one meeting of the members (if LLC) each year and a yearly financial report.

Because it is closely aligned with a school, I'd check with them to see how they want it arranged.  Often times, they like for outside organizations funneling money to school sponsored organizations to be set up like Booster Clubs.  It just depends on what your school district prefers, but it can be a pain to "reimburse" the team if your organization doesn't fit the district's expectations for this sort of thing.

Good luck.

Edited October 11, 2021 by dcbc

[Brisketexan 105383]

Odd way to come out as a pedophile, but you do you.

[Brew 3049]

On 10/7/2021 at 8:55 AM, You don't know me said:

Hopefully there is someone on here that has done this before.  We recently started a youth wrestling club in town.  I have registered the name with the state, got an EIN from the IRS and opened a bank account.  I have also registered the club with AAU.  My concern, however, is how to proceed.  Do I need to register as a non-profit somehow?  Also, how can I be certain that board members' personal assets will be protected if something were to happen? 

Once incorporated, you just need to file a 1023 to get recognized as a 501c3 by the IRS. They have a detailed checklist of information you have to include, but most of it can be done by you unless you can find an attorney/CPA to handle it. You will need a board, bylaws, the documents you received when you originally formed, etc. The IRS has moved the process online and it can be handled through their website. Once you get the 501c status recognized by the IRS, you typically have to file with the state also. I do work for several club sports groups, it’s not that difficult or expensive to keep up with.

[orange dream 1256]

join a club they said, it will be fun...

 

[You don't know me 1161]

Yeah, the jokes were expected.

For a little context and background:

We are taking over a club that has been in existence for about 20 years or so.  The person that ran it before us kind of let it go for the last 2 or 3 years.  Registration numbers were very small pre-Covid and Covid certainly did not help.  He let our tournament date get away from us, so we've had to work to get that back.  I have had 2 boys wrestle for the high school (one graduated in 2020 and the second is in his senior year now) and I have another 2 that are interested in wrestling - one in 6th grade and the other is in 3rd.  I've been kind of involved helping the high school coach with keeping score, running tables for tournaments, stuff like that for the last 5 years.  I've seen that we do have decent numbers on the high school team, but the better programs in the state have much larger participation.  One school in particular has over 100 kids in the wrestling room every year.  We, on the other hand, have about 20-30.  We typically have more kids on varsity than we do on JV.  About this time last year, the high school coach asked if I would be interested in helping out with the youth program because he wanted to give it a re-boot.  So, here we are. 

I know you guys are just messing around, but there really are no bad intentions.  The high school coaches are going to be running the youth practices.  This will get these kids familiar with the way they work and hopefully have them ready for high school wrestling as freshmen.  He's just trying to build the program up from where it is now, which is not horrible, just not where it could be.  He's been good to my boys and I feel an obligation to help as much as I can.  He turned the older one into a 2 time state qualifier and the one that's a senior now is in a good position to wrestle in the final match on the last day of the state tournament this year.  Neither of my boys that have wrestled for him started until 7th or 8th grade, so their success is entirely on him and how he developed them.  So yeah, I kind of got roped into this, but I did say "sure" when asked.

[troph 24911]

I was planning to come back and mention the docs but others have you covered well. The only trap is making sure your organization’s docs have the language required to get (c)(3) status the app itself should be fairly easy that is unless this is a front to siphon money to yourself that’s actually frowned upon by the IRS.