Club dues/Bank Accounts/Taxes

[Shodog]

Forgive me if this post is in the wrong place...if it is please let me know...but I have a question about taking money for dues, bank accounts, taxes, etc.

I'm pretty sure the general answer is going to be "find out the laws in your local area" but I'm hoping for a little guidance.

I have recently started a martial "club" under the auspices of my national federation. It is a "not for profit" meaning I'm not making a salary and am actually paying dues myself.

All monthly funds collected go toward paying rent on the building where we work out. We are covered by the facility's insurance and some of the money we pay in rent, obviously, goes towards that. There is some "left over" money which will go into a club fund to help pay for high ranking instructors to come train us, equipment, travel expenses when we travel to other dojos, etc.

Here's my question:

What do I need to do to set up a bank account for the club fund? I'm worried about the IRS seeing this as personal income and me having to pay taxes on it. Will I have to pay taxes on it? Do I need to set up an LLC, or file Articles of Incorporation, etc.

I'm really kind of a babe in the woods/deer in headlights with all this stuff.

Any direction/advice anyone could give would be most appreciated.

Thanks,

Jim Mahanes

[trevorg]

Simplest answers is ask your national federation.

Osu
Trevor

[Robert Wolfe]

You could also talk to a local tax accountant for advice on the most advantageous approach. Even if you have to pay for the consultation, it would be a small investment compared to the potential costs of flying blind.

[Shitoryu Dude]

You're going to need to incorporate your club as a non-profit organization, which will involve some paperwork at least the state level.

Once you have completed that you will have the needed documentation to take to a credit union or bank (I suggest a credit union if you can do it, banks will nickle and dime you to death) and open up an account as a non-profit.

I'd suggest consulting a CPA or a lawyer that specializes in this sort of thing, or contact city hall for some guidance. If nothing else, find another non-profit organization and talk to them.

[lucky1899]

I'm a CPA in Texas (082773) and laws here are especially stringent because we have no state income tax. I'm not sure about Kentucky but you can be sure the state and the federal government will both require tax forms/returns of some kind.

My general advice to anyone starting a business is to open a separate bank account for business transactions. Don't mix personal and business funds for any reason. If you want to set up your school as an NFP, contact the IRS; the forms are long and complicated but the IRS hotline is really helpful. Lawyers usually get involved when setting up legal entities for tax purposes (it's actually illegal in Texas for me to give advice on setting up corps, LLC, and the like). You can get decent information from the state comptroller's website on what type of entity is best for you.

http://www.irs.gov/help/article/0,,id=96730,00.html

To answer your questions; you "should not' be liable for income taxes on funds that are not income. The catch is what you can prove (hence the separate bank account advice). Also remember that revenue (member dues) is not income (some states also have margin taxes on revenue e.g. Texas). The income is revenue MINUS expenses (e.g. seminars, rent, etc.).

For more information, I highly recommend contacting a local CPA, the comptroller's office, or the IRS.

Good luck.

Andrew De Luna

[Shodog]

Thanks everyone....interesting stuff here.

Keep the advice coming.

Jim