Chapters and Associated Groups: Know your corporate status!

I want to remind chapter and associated group leaders about the importance of a corporate status.  This may be a no-brainer to some, but many organization leaders confuse this with the tax-exempt status (i.e., 501(c)3, 501(c)6, etc.)  There is really no connection between these two.

The process for becoming a formal non-profit, professional or trade organization typically involves obtaining an Employee Identification Number (EIN) which eventually becomes the organization’s Tax Identification Number (TIN) (once granted tax-exempt status from the Internal Revenue Service).

During that same time, most leaders/staff also work on having the organization become a recognized business entity in their state (or in another state with the help of a registered agent, but that’s a different blog post).  This process typically involves (1) completing an application for incorporation and (2) paying a registration fee when the application is filed.

Information regarding the forms, where to submit them and filing fees can ordinarily be found on the state’s Secretary of State or Corporate Commission website.

This part of the process is relatively easy and painless.  In fact, most states have gone completely electronic with this procedure.  The problem that I come across working with many smaller organizations is submitting the follow-up reports AFTER they have been incorporated.  You see, in order to maintain that corporate status, you must file regular reports letting the state know your organization continues to function as a business.  This is the opportunity for them to collect updated information on your organization as well (e.g., officer, business address, etc.)  Many states also collect a fee each time the report is filed (which may be annually, biennially, etc.)

Submitting these annual reports is important – if you don’t, your organization runs the risk of having its corporate status suspended or removed.

Why is all of this important anyway? Because having that “corporate covering” is the first line of defense for lawsuits brought against your officers, members and staff.  Many underwriters for directors and officers’ insurance, general liability insurance or event cancellation insurance won’t issue policies to unincorporated entities.  Some vendors like hotels and resorts will not conduct business with them either.

Many states do very well in sending reminders several weeks before annual reports are due, but if your association contact changes frequently or if you just aren’t sure, do some research on your state’s Secretary of State or Corporate Commissions website.  Better to be safe than sorry!

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One Comment

  1. Hotels Tacloban
    Posted March 29, 2012 at 9:18 pm | Permalink

    This is a very good info thanks for sharing!

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