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Fat Dad
Trad climber
Los Angeles, CA
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Topic Author's Original Post - Sep 15, 2014 - 10:33am PT
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I've been asked by a coach of a kids climbing team at a local gym to help them form some corporate structure for liability purposes. I'm a lawyer and can see the benefits of either forming an LLC or non-profit for that purpose, but was curious what others involved in similar pursuits have done. This is a small outfit, with very little income generated and which will not expand beyond coaching a team of about 20 kids at this local gym. The primary concern is liability. I'm sure there's probably a pretty standard practice for situations like this, but that's clearly out of my field of experience. I'd love to help them at little to no cost, so I'd appreciate some feedback on what others might have done and how well it's worked.
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NutAgain!
Trad climber
South Pasadena, CA
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Sep 15, 2014 - 10:45am PT
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Maybe follow up with Chris Bellizzi. You can reach him here:
http://www.bellizzitree.com/
I recommended his company to clear out a fallen tree last year, and he told me about a new non-profit he is starting to expose more kids to climbing:
http://www.achievaclimbing.com/
{
Non-Profit with goal of Climbing Walls in every Public Jr and Sr High School in America
}
{
We have a mobile climbing wall and our intent is to bring it to your school first to introduce you to the idea and give you a first hand experience. The goal is to build climbing walls in inner city schools to give at- risk youth the opportunity to learn about healthy alternatives to obesity and gangs. This will help with their confidence and their ability to make goals and achieve them in all aspects of their lives to become effective contributing members of society.
}
I suspect he must have to deal with liability issues.
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ontheedgeandscaredtodeath
Social climber
SLO, Ca
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Sep 15, 2014 - 11:14am PT
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Getting non profit status is kind of a pain and won't have any impact one way or another re liability. If you are doing it for free I'd go with an llc.
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JEleazarian
Trad climber
Fresno CA
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Sep 15, 2014 - 11:17am PT
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I've only set up corporations for that purpose, but that's because LLC's didn't exist until shortly before I quit active practice. The California non-profit mutual benefit and public benefit corporations were straightforward in those days (i.e. 2005 and before).
The big issue for us was liability insurance. Particularly if there's only one instructor, any tort liability will almost certainly result from the actions of the instructor, so "respondeat inferior" required that we give the instructor as close to full coverage as possible.
I wish I could give you more current information, but I suspect -- and certianly hope -- that by keeping this on Page one, someone whose done this recently can give you the current scoop.
John
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ontheedgeandscaredtodeath
Social climber
SLO, Ca
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Sep 15, 2014 - 11:22am PT
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Lemme clarify- easy to form, quite a bit of additional work for non profit status from the IRS.
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Fat Dad
Trad climber
Los Angeles, CA
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Topic Author's Reply - Sep 15, 2014 - 11:37am PT
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Thanks for the responses thus far. ontheedge is right in that the Service does make you jump thru more hoops to get the 501(c)(3) status, but I've done it before. I suppose it wasn't so bad when I was getting paid, but my feelings might be different if this is pro bono. I was thinking nonprofit since it really fits that model better, and it would open up the prospect of parents being able to donate funds toward the team and get a deduction. Still, if the LLC model gets them the liability easier, then that may not be a bad way to go.
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Shimanilami
Trad climber
San Jose, CA
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Sep 15, 2014 - 12:52pm PT
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I'm on the Achieva board of directors and can tell you that getting our 501c3 was a nightmare. It took us >18 months, with an unbelievable amount of bureaucratic BS. I did something similar 15 years ago, and it was nothing like it is now.
So unless you really love paperwork and can afford to wait for a year and a half or so to get your 501c3 recognition, I'd say avoid this route at all costs.
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Splater
climber
Grey Matter
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Sep 15, 2014 - 01:05pm PT
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Doesn't the gym already have liability coverage that includes instruction?
Can that coverage include non-paid employees (the coach)?
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JEleazarian
Trad climber
Fresno CA
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Sep 15, 2014 - 01:10pm PT
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Splater,
Any gym's liability insurance would not cover the possible liability of an association that teaches climbing to outside groups, independent of the gym. The association, and its members, become more deep pockets unless the association has some form of limited liability. Hence the discussion of LLC or corporation.
I can concur on the apparent increase in difficulty in receiving 501(c)(3) clearance. WHen I did this 20 years ago, it was a fairly simple matter involving little more than submitting Articles and By-Laws, each of which contained appropriate dedication clauses. Now, it appears that the IRS is using the need to wait as a way of thinning out applications. Unless you've planned far enough in advance to be able to wait 18 months for 501(c)(3) clearance, you don't bother asking.
John
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Jon Beck
Trad climber
Oceanside
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Sep 15, 2014 - 01:19pm PT
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it would open up the prospect of parents being able to donate funds toward the team and get a deduction
That will jeopardize your 501c3 status. Deductible donations have to be given with no strings attached, otherwise the benefit received in return reduces the deductible amount. When you donate to your local public TV station and they give you a coffee mug, the value of the mug is excluded from the deductible amount. Donations for a specific person are a no-no, but I know that people do it all the time.
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Fat Dad
Trad climber
Los Angeles, CA
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Topic Author's Reply - Sep 15, 2014 - 01:29pm PT
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Any contributions, if any would probably go into a pool for payment of travel expenses or meals while at comps. That kind of thing.
Also, Shimanilami, thanks for your comments. A question though: you've expressed frustration at the 501c3 process, but you clearly thought it was worth getting and hung in there for the process. I suppose the question is would Achieva been comfortable operating as an LLC instead and, if not, why not? I'm guessing that your funding is tied pretty heavily to receiving grants but, like I said, am not super familiar with how organizations such as your's operate, so that's clearly just a guess.
One thought I have after considering your responses is that we can form an LLC and then consider converting to a 501c3 while we have the limited liability already in place.
Edit: Splater, I've asked the coach to look at being added as a co-insured on the gym's policy. I'm not sure if the insurer may have already required that as a basis for the gym even having a team.
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Winter
climber
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Sep 15, 2014 - 01:54pm PT
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Forming a non-profit is just as easy if not easier than forming an LLC. And, in most states, the protections for individual liability are better in a non-profit as opposed to a for-profit entity.
To become tax-exempt, you have to jump through IRS hoops, but that isn't necessary if you aren't looking for tax benefits and instead are just looking for liability protection.
PS Don't take legal advice from the internet.
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