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Nonprofit Law/non profit for softball league??

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QUESTION: I have been playing in a co-ed church softball league for about 8 years.  I have been on the "board" for 3.  The "board" made the schedule and collected fees that covered the cost of renting the fields and buying the softballs and trophies.  I used the term "board" because we never were a non-profit with by laws and such.  We had volunteer umpires. This year one of the board members insists we be a non-profit and that we have by laws and liability insurance, etc.  I am wondering if we really need to do all that?  The league has a bank account for the simplicity of paying the field rental fees.  In the past, the league was run under the umbrella of a participating church but it is not now.  Thanks for your help!

ANSWER: The main problem with being an unincorporated association is that, under common law, if there are any debts or lawsuits, each member is personally liable. Some states have, by statute changed the common law:
--- Start of Excerpt ---
Legislatures also took steps. Perhaps the most striking are the statutes adopted in many States in the last decade excusing officers, directors, members, and volunteers of nonprofit organizations from liability for simple negligence. See, e.g., M.C.L. § 450.2209, M.S.A. § 21.197(209)(Michigan).
--- End of Excerpt ---
http://scrible.com/s/g4Q0y

That is probably why that other board member wants to incorporate.

After that quote above, the conclusion of that 1997 report was, "The Michigan Law Revision Commission recommends that the Legislature adopt the Uniform Unincorporated Nonprofit Association Act."  That act would "The basic approach of UUNAA is that an unincorporated nonprofit association is a legal entity for the purposes that the Act addresses: owning, receiving, and transferring real and personal property; non-liability of members for the association’s tortious acts or omissions; and capacity of the association to sue and be sued. It does not make these associations legal entities for all purposes."

Footnote 6 in the 2012 article at http://www.wmitchell.edu/lawreview/Volume38/documents/7.Miller.pdf
listed some states that had, by then adopted that UUNAA, but Michigan is not on that list.

Harvey Mechanic, Attorney at Law -
Harvey108@hotmail.com

P.S. This response is intended to be a general statement of law, should not be relied upon as legal advice and does not create an attorney/client relationship.    



---------- FOLLOW-UP ----------

QUESTION: Thanks for your prompt response!  To make sure I understand, if we do not do it we could be liable for injury or other lawsuits?  if we have an EIN number do we have to have by-laws and all of that?  Will it be a problem that we have not done that in previous years? I don't think we filed tax returns previously.

Answer
Individuals in the group now could be sued and held liable if someone is injured, for example, by some club activity.  An EIN does not mean anything as to state liability laws. An EIN may be for an unincorporated association.

I am assuming that, when the club officer applied for the EIN he or she did as the IRS explained in their Instructions for Form SS-4 http://www.irs.gov/pub/irs-pdf/iss4.pdf -- The IRS explains in the right column of page 5 that, when applying for the Employer Identification Number, the club may check a box for `Banking purpose' "if you are requesting an EIN for banking purposes only, and enter the banking purpose (for example, a bowling league for depositing dues or an investment club for dividend and interest reporting)."

As for previous years, I do not see any tax reporting requirement with the IRS or taxes due. Narcotics Anonymous World Services advises affiliates who have
obtained an EIN (Employer Identification Number, also known as the
taxpayer identification number) for banking purposes only:
--- Start of Excerpt ---
Any NA group that acquires an EIN should consider that the IRS
could at some point in time contact them and request valid
financial activity information. This is one reason that NA groups
will want to maintain detailed records, including treasurer's
records, bank statements, receipts and any other documentation of
their financial activities. We suggest that NA groups maintain
accurate financial records by using the group record worksheets in
the Group Treasurer's Workbook. The worksheets and other above
mentioned records should be kept for at least five years. Care
should be taken when assigning responsibility for storage of the
records, so that they remain available to the group if needed.
---End of Excerpt---
http://www.na.org/?ID=bulletins-bull32

Harvey Mechanic, Attorney at Law -
Harvey108@hotmail.com

PS. This response is intended to be a general statement of law, should not be relied upon as legal advice and does not create an attorney/client relationship.  

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Harvey Mechanic

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I am an attorney and I volunteer time to answer general questions about U.S. Federal income tax issues of nonprofit 501(c)(3) public charities only. Those questions could be about establishing and maintaining legal requirements for such non-profit organizations in the United States, including Internal Revenue service filings and requirements. I will not be working on this free forum to answer questions about Nonprofit's possible unrelated or for-profit businesses or how to fill out forms. This forum is only for general questions about federal tax law, not as the law applies to your specific situation. If you do not make your question public then I will not be spending much of my donated time on answers that would not benefit the public. If you have other questions, please contact me at Harvey108@hotmail.com I will reply from my email. In any case, do not reveal confidential information to me until after I have contracted with you to provide personal legal services. My responses on this forum are intended to be general statements of law, should not be relied upon as legal advice, and do not create an attorney/client relationship. For me to consider your individual situation and how the law applies, I would need to gather extensive information about the situation. To search my previous answers you can do a Google search by "site:allexperts.com/q/nonprofit" without the quotes and then add your search terms before hitting enter.

Experience

I have been practicing law and especially the law of nonprofit organizations since 1990 when I was admitted to the New York Bar and I have maintained my status with the Bar since that time.

Education/Credentials

B.S. Columbia University in New York City, 1970

J.D. (Law Degree) Brooklyn Law School, 1990 -- Cum Laude.


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