Incorporating a club

[kuhner]

I have searched the forums but have not found anything related to incorporating our local club. What experience have others had in this? Some of our members have mentioned if a member should cause an accident all of the club members could be responsible if we were not incorporated. Would being affiliated with AACA make a difference, if we were a chapter-region would we be considered part of the AACA LLC?

Thanks

[Steve Moskowitz]

This is a hugely complicated situation. Incorporation is not dificult to do and makes sense for many regions. I do not want to dispense legal or tax advice as I am not qualified to do so. However, our experience suggests that it is appropriate for clubs to do especially if there are any significant assets or liability issues within the club. We generally reccomend that it is a good thing to do as it protects the members of the club in several ways. Affilating with AACA would not make a difference as regions and chapters are autonomous. You still should considered an incorporation or llc. Again, it is not difficult or expensive.

Regions and chapters of AACA are covered by a very inclusive liability policy and a officers and directors liability policy. This is a huge benefit. You really should consider this if you are not carrying liability insurance. Contact me and I can send you a information package.

Edited March 12, 2013 by Steve Moskowitz (see edit history)

[NTX5467]

As mentioned, incorporation can be a good thing to do for free-standing organizations. It can limit, possibly, any liability to that of the total organization (possibly including the club's officials-of-record) rather that potentially that each club member could be included in the litigation for damages.

Being incorporated can also trigger some registrations and annual reports which your State Comptroller's Office might require for incorporations. Plus the e990 Postcard at the federal level. For many reasons, the lowest level of any "taxation" is usually well above the revenue which most car clubs could dream of generating. Hence, more paperwork to keep track of the corporation in the annual filings (which are usually public record).

Even if the individual group might incorporate, they should still do what they can to protect themselves! This can mean an effective "Disclaimer" clause at the bottom of any registration form, which the entrant must sign before they can enter the event. When we first started doing our car shows, we were advised to have a disclaimer statement on the entry form, but others claimed it could be "worthless". Still, we felt we were better to do it rather than not to. Basically, the form (in whatever language you might choose, as in "convoluted legaleese" or more concise) that all entrants are reponsible for their own belongings and actions of those with them. Any damages which might occur will be worked out between those involved -- only. Plus (a key thing here), that all entrants will abide by the rules of the event administrators if they desire to participate.

In the 1980s, our club did some road rallys with our annual show event. We were cautioned that if anybody participating was run into by another driver, that our club could be sued for the damages as they were incurred by an activity participant. Personally, I thought that only the two drivers involved (who were required to have insurance!) should work it out between themselves and/or their insurance companies. I didn't see why the club would need to be involved at all, but some claimed we could be.

The other reality issue, to me, is that while many lawyers might seek "big $$$$$" settlements/judgments, few car clubs have that kind of money in their treasury. Certainly, an agressive lawyer could bankrupt the club and not look back, but I suspect few would take a case when the total "take" might be $10K or less. Deeper pockets are usually sought out in the laundry list of people being sued, by observation.

In the earlier years of the club, we made sure our backsides were covered and we were very lucky to have had some great, level-headed officers running things, back then. So we seemed to have dodged many potential "bullets" over the years. Back then, too, to do a good incorporation, it took a knowledgeable lawyer (which few of us had real access to) and cost a good bit of money (about $500.00+, back then). So we kind of slid by on that deal. In more recent times, there are some good websites on the Internet which can do online incorporation documents in your state, acting as your "agent" in these matters, for a fee. Generally, less expensive and less painful than in the past.

BEFORE doing an incorporation, though, you'll need to do research in your state as to what is required AND which type of corporation you desire to end up with. That last determination can be a huge influence upon how things work, over time. As in if the organization might be "a social group", or a "non-profit" which can accept donations, or whatever. There will generally also need to be a "Bylaws" document of self-governance . . . which your bank might also require a copy of. This can also lead to a Taxpayer ID Number (TIN), too . . . which turns out to be more for tracking purposes than revenue collection. It can also be good to have a procedure where each check written for reimbursement or expense (from the club's treasury) to be balanced by a Reimbursement Request Form (with supporting documentation) or, in the case of expenses, a receipt for what is being paid for.

As things have progressed over the years, many car clubs have become incorporated. Each has their own reasons for doing this, I suspect. What I've mentioned above is from my own observations of being an officer in several car club groups over the years. Key thing is that incorporation might not be as good of a protection as actively doing "loss control management" or what I term "advance damage control" BEFORE and to prevent anything flaky from happening, but incoroporation might present some advantages/benefits, too. Being a chapter of a national organization can bring a different set of benefits/regulations to the group's operation. There is not ONE universal set of truths in this matter, it seems, so I'd recommend you seek information from your local credible sources and proceed as y'all determine appropriate.

Just some thoughts (I'm NOT a laywer, either!),

NTX5467

[28 Chrysler]

You could also investigate forming an " LLC ". These require less paper work.