Motorcycle Club - legal questions?

[Doc_Busa]

I am the treasurer of our local sportbike club (www.sincitysportbikes.com). We are sponsoring more and more events and getting nervous that we (the officers) could be help personally liable if someone got hurt and sued. Does anyone know how this works? If we form a limited liability corporation, does that protect us?

Also, does anyone know if we have to pay taxes on our club funds? We heard it is a pain in the ass to do a non-profit deal?

Any help would be GREATLY appreciated!

Doc

 

[bacharles]

Actually Doc, what an LLC does is distributes any liabilities and/or proceeds (i.e. monies earned etc.) evenly amongst all parties forming the LLC. It also provides benefits as opposed to forming a corporation for tax purposes. It basically does exactly what the name implies... Limited Liability Corporation. Here's a simple example to give you an idea how it works: Suppose you formed an LLC with two other persons. One person's investment into the corp. is 40%, another person's investment is 40%, and your investment is 20%. What this means as far as any profits are concerned---is that you will only get 20% of what profits the corporation may get. In the case of a liability. Say in the instance that you may be sued for whatever reason. You are only responsible for 20% which is your percent interest in the corporation. Now I'm not sure how the laws govern a motorcycle club since they are mostly non-profit organizations and are taxed accordingly. The major benefit of an LLC is primarily for tax purposes, but the other examples that I mentioned before apply also. There is more that I can go on about, but these are the basics. Hope this helps.


Brian

 

[Doc_Busa]

Thanks Brian! I still don't understand completely. It sounds like the LLC does not protect the officers from the possibility of a law suit. Should we NOT do the LLC? We charge a membership, and we carry funds in a bank account, but no body gets paid and most of the $$$ goes for charity events. That said, we are afraid that we could get sued if someone gets hurt...

Any suggestions?

Thanks again!!!

 

[zukracer]

not sure on these things, but I've found lots of answers to legal questions on www.findlaw.com Might be able to dig up something there that can help answer your questions.....some of its pretty legal pooh but then again, they do have a lotta stuff in plain english too

 

[thesnake]

An LLC will protect member's individual assets, assuming they meet all legal requirement for an LLC. I'm not how this plays into the area of personal injury law as they may sue an organizer for careless/recklass behavior along with the LLC.  I would recommend contacting a local attorney. At the very least, I'm sure the LLC would want to pick up personal injury liability insurance-- but can't say for sure. Good luck and let us know how you make out.



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[Gpirelli]

LLC, LTD, and Incorporating are all legal forms designed to protect the shareholders of a company. I'm sorry I'm a little dusty with the specifics, but I know for a fact if you incorporate it will protect your personal assets. It all also depends on the clauses. I'm more familiar with the business perspective. I really have no idea how these things work for clubs and non-profit organizations and such...there might be more to it, and I would assume more in your benefit since the club is not profit oriented. Another thing to look into is which state you do it in. Your organization does NOT have to be based out of whatever state you incorporate in, that is why a very high percentage of companies incorporate in the state of Delaware due to their favorable laws. Sorry if all I did was state the obvious. I would definitely recommend legal consultation for a matter like this though.

 

[Big Wall]

Contact an accountant for questions about taxes. Most will give you a free 1/2 hour. Talk to a lawyer for questions about a LLC. A lawyer should give you a free 1/2 hr also. LLcs have been around since the 60's and are so legally complex that no one really knows all about them. When my wife and I formed our business, the lawyer said that a corporation was easier and less expensive to set up. If you are sued you are protected as long as you haven't crossed the corporate/personal "boundary" (keep corporate $ and personal $ separate, etc.) Talk to the lawyer about liability also.

When it comes down to it, if you are sued, you can go bankrupt and form a new corporation if needed.

 

[ks-waterbug]

Got ya covered here.... (P.S. your probably looking @ Non-profit, under the IRS codes "501&copy;(7) Social clubs. The membership in a social club must be limited. In general, a club should be supported solely by membership fees, dues, and assessments.") Some other things to consider...
What are the benefits of forming and operating a not-for-profit?

One is limitation of your personal liability - which can also be accomplished to some extent by incorporating a for-profit business. Another is exemption from payment of some, but not necessarily all, taxes. Another is the ability to raise funding from donors that will only fund tax-exempt, non-profit organizations. This should get you started in the right direction..
READ ME!

 

[Rob'sBus]

My law office is an LLC. In my state (Ohio), an LLC (aka Limited Liability Company) is not an incorporated entity but protects the owners from personal liability in much the same way. It's easier to explain by first comparing it to the other forms of legal entities. A partnership typically gives no personal liability protection to the individual partners but as far as tax liability goes, it's a flow-through taxable entity. In other words, taxes are not paid on the partnership profits but rather on the individual partner's taxable income. A corporation on the other hand provides liability protection to its shareholders/owners (in other words, no personal liability for corporate liability) but it's double taxed. That means the corporation must pay corporate tax and the individual shareholders/owners must pay income tax. An LLC combines features of these two. It provides for personal liability protection for the owners/officers for LLC liabilities but it's taxed like a partnership, as a flow through taxable entity. It's similar to a Sub S corporation. Check you state law regarding the specific laws that apply. An easy place to do so is on your state's secretary of state website. Good luck!

 

[NearDeath]

The LLC will protect your personal assets from a lawsuit, but not the business. The judge in court can still make a judgement against your personal property if he feels that you/officers have not followed protocal in some way. This usually applies to accounting practices...

Cloud

 

[pennetta]

An LLC does protect your personal assets as long as you acted under the direction of the organization and its bylaws. You should have Board Insurance as well, especially if your MC club does not have any assets to defend you with.
If you are a registered not-for-profit and you gross income is less that $30,000 year. You have to file, but you don't play taxes.

 

[Doc_Busa]

Thanks so much for all the info!!!

We heard that it is a major pain to file for non-profit status. Is that true or? Can we be an LLC and non-profit status? We would be WAY WAY WAY under $30,000... We hit a max of around $2k in our accounts.

Thanks again!