Do we need to register as a club for legal purposes?

Jerry A. Dressel on

New clubs often wonder..... "Do we need to register as a club for legal purposes?"

The answer is a resounding YES. Most clubs are established as a partnership. As such, before you open a bank or brokerage account and before you make your first investment, your club should obtain a Tax ID Number, otherwise known as an Employer Identification Number or EIN. This EIN is the equivalent to a Social Security Number for your club. To obtain an EIN you will need Form SS-4. Simply contact the IRS or go to the IRS web site at http://www.irs.ustreas.gov/forms_pubs/forms.html to download Form SS-4. Once you have the SS-4 Application for Employer Identification you will find that it provides all the additional information you will need.

Also, when you establish your club you must decide which state to form the partnership in. Normally a club will form in the state that all or most of their members reside in, however, not all states are created equally. Some states have more burdensome rules for partnerships then do others. If you have club members in more than one state, it may pay to shop around and form your partnership in the state with the least burdensome partnership rules. In many cases, but not all, the state will require your partnership to register with the state or county. Often this is called a "Doing Business As" or "DBA" filing. This simply registers the name of your business (club) with the state.

Also, many states, but not all, require a partnership to file a state partnership tax return each year. Most a state partnership returns are fairly simple, requiring you to answer a few questions and attach a copy of your club's federal return. The best source of information about your state's requirements for both the DBA filing and the state partnership tax return is the Office of Secretary of State, the Commerce Department, and/or the Department of Revenue.

Jerry Dressel

St. Louis, Missouri

Trez_Talk@bivio.com

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