We continue to be astounded as we discover amateur sports clubs operating either as an unincorporated association or as a nonprofit corporation unqualified as a tax-exempt organization.

In either instance, club officers, and possibly club members, are PERSONALLY at risk for the club's legal liabilities and financial obligations!

Here's why:

A. Unincorporated Amateur Sports Clubs. If your amateur sports club is not incorporated under state law, it will likely be legally characterized as an "association," i.e., a general partnership. Accordingly, the association's officers and members may be jointly and individually responsible for any uninsured (or underinsured) club legal liability as well as any club unpaid financial obligations. This could be painful to club officers and members if an amateur sports club athlete claims discrimination, or is otherwise injured, and a lawsuit is filed against the club, its officers, and members.

Furthermore, to the extent club net income exists, (gross income less legitimate club operating expenses), federal and state income taxes, accompanied by interest and penalties, may be due.

In our view, amateur sports clubs should be incorporated under state law as nonprofit corporations. Contrary to popular opinion, however, the incorporation of an amateur sports club is not a simple procedure of little consequence. No, the incorporation of an amateur sports club is fairly complicated, and great skill is required to implement tax and liability-limiting protections. If your club is not incorporated, contact us at once.

B. Incorporated But Non-Exempt Amateur Sports Clubs. If your amateur sports club is incorporated under state law as a nonprofit corporation - but is not qualified as a tax-exempt §501(c)(3) organization, your club may be liable for years of unpaid taxes, plus interest and penalties. And if more than 15 months have elapsed since incorporation, there will be tough IRS questions to answer as to why tax-exempt status was not timely sought.

Many people think a nonprofit corporation is nontaxable, but it isn't true. You see, a nonprofit corporation is taxable on its taxable income at corporate tax rates, UNLESS it is qualified as a tax-exempt organization under federal law.

Today, amateur sports clubs are springing up across the country in increasing numbers. We believe it's important for club officers, and club members, to be certain of their club's organizational and tax status. A slip-up here and a well-meaning amateur sports venture may turn into a liability and tax disaster. Call us - we incorporate and obtain federal tax-exempt status for amateur sports clubs wherever located - in any state, and we can help you.