To Incorporate Or Not Incorporate
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To Incorporate Or Not Incorporate George Fernett wrote.........
Lately, we have been
hearing that we should "incorporate" our club, to protect each individual from
any problems (lawsuits, etc) that might occur for whatever
reason.
Most clubs form as partnerships since the potential
risk of liability is very small. Unless a club borrows or uses
margin, the potential risk usually revolves around, and is limited to, the
slight possibility of personal injury related to an accident at the location of
the meeting. Therefore, the high costs associated with incorporation
usually far outweighs the slight risk of a partnership form of
organization. Also, if your club is a member of the
National Association of Investors Corp. (NAIC) your club (partnership) is
automatically covered by liability insurance. Check the NAIC web
site at www.better-investing.org for more
details.
Also, we were told that
when we file our taxes next year and every year after, each member would have to
file their own forms relating to the club even if they did not take any sort of
distribution, along with the club filing its own.
Except in very limited circumstances, a partnership
must file a partnership tax return each year. This return, including Form
1065, K-1's, and associated schedules is simply an informational return since
all taxable items and expenses pass through the partnership to the individual
partners. This return includes the amount of income, expenses, and
gains/losses realized by the club during the year and the share of each
allocated to each member. A copy of the K-1 is given to each member
so that they can report the applicable items on their individual tax
return.
Thanks for using bivio!
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