How do I establish an account for a small, informal organization?
August 20, 2013 8:37 AM   Subscribe

I'm taking over the reins of a small, amateur sports team. Our budget is under $5,000/year, mostly donations solicited from sponsors. How do I manage this money?

The outgoing manager of the team had a federal EIN so that he could establish a bank account as "[his name] doing business as [our team name]" which let him receive checks made out to the team name. He paid the taxes on the money that was coming in, which was pretty marginal and didn't really matter since apparently he got a pretty big refund because of something about interest on his house. His attitude about this whole approach is, "I have no idea if this was the right way or best way to do this or not." A couple of sponsors issued him 1099s for the payments to the team.

I could just set up a separated, personal account in my name to manage these expenses, but I wouldn't want any of the other members to feel like I've got unilateral control over the finances or have the opportunity or temptation to embezzle - even with the small amounts at stake. And I'm not sure if asking sponsors to write out a check to me would dissuade them.

So - any ideas? What other things do I need to consider or keep in mind?
posted by entropone to Work & Money (11 answers total)
I would set up the team as a legal non-profit and put the accounts in the team's name. You don't want the liability that comes with the money being in your name. You will probably need a lawyer or CPA to help with the paperwork.
posted by COD at 8:50 AM on August 20, 2013 [1 favorite]

Definitely speak with a CPA about forming a business entity. However, depending on where you are, a non-profit might be more of a pain in the ass than its worth. Forming business entities is my day job, and in NYS, the process to register a non-profit after filing it with the state is 6+ months and expensive.

The few sports teams I've registered have all been plain LLCs. Can you speak with another team manager in the league and see what sort of structure they have/who helped them with it?
posted by griphus at 9:07 AM on August 20, 2013 [1 favorite]

If you have a preferred bank (or even better, a credit union), I'd speak with an account manager there. This is an incredibly common type of account, and if you already have an EIN for the team (not for the former manager), it should be easy to set up.

Is your team part of a larger league? It's possible that the league already has the right paperwork in place and you can simply get a bank account based on whatever their status is (ie, they are a non-profit or an LLC, and you get an account as a sub-part of their organization).
posted by muddgirl at 9:22 AM on August 20, 2013

Do you happen to know what sort of EIN it is? When you apply for one, you have to indicate the sort of business structure that goes along with it (sole proprietorship, corporation, non-profit corporation, etc.) There's a chance the outgoing manager set up more than just an EIN.
posted by griphus at 9:27 AM on August 20, 2013 [1 favorite]

Response by poster: Hmmm.
I think the former manager is closing or otherwise ending the EIN, as it's in his name.

Speaking with a CPA, using words like "business entity," and all this stuff just seems overwrought for something of such small stakes. Though I could just go into my bank and chat with somebody there.

Unfortunately, there's no league - it's not a particularly centralized or well-organized sport.
posted by entropone at 10:31 AM on August 20, 2013

I am the treasurer for an organization with a slightly larger budget than that. Part of what we do is organize a weekend conference in a different part of the country every February. Local members organize the conference. They used to be able to open a checking account to use for conference income and expenses, and then close it after the conference ended--so a new account was being opened and closed every year. This has become more and more difficult post-Patriot Act, to the point that for the last few years, the conference committees have been unable to find a bank or credit union that would let them open an account, and we have ended up channeling conference funds through the organization's long-established main account.

Our experience indicates that it is not easy for individuals to open accounts for casual organizations.

One work-around some local organizations have been able to use is to get an account at the local university credit union. If you have a faculty member, staff member, or student in your organization, they might be able to sign for you to get a "student organization" account.
posted by not that girl at 10:40 AM on August 20, 2013

Yeah, chatting with the bank is fine, but they might suggest the same thing. "Business entity" is just bureaucratic speak for not-you. As in, the previous guy had an EIN for himself as John Smith and filed the paperwork with the state or county (or both, depending on where you are) to do business as Fighting Mongooses Dodgeball Team. That filing let him accept checks cut to that name instead of just John Smith. You can do that as well, however the problem in your question will still exist as the Fighting Mongooses Dodgeball Team will just be another name for you, not a separately existing entity.
posted by griphus at 10:41 AM on August 20, 2013

Also, based on what you describe, what the previous guy most likely had is called a sole proprietorship.
posted by griphus at 10:46 AM on August 20, 2013

This is in no way legal or tax advice, and I am not an expert at all in this area.

An amateur sports team I was involved with was set up several years before I joined and I couldn't make contact with the people that set it up.

We eventually found our federal EIN. Our entity was registered with the state as a "non-profit with mutual/member benefit" in the state (Oregon).

As far as I could tell, we were never 501c3 (federal non-profit). I'm not sure we really could have been since we were registered "mutual benefit" and not "public benefit" with the state. Again, I am not an expert - I saw other teams registered as 501c3 non-profit.

I think I read that an organization has to have revenue of >$25k to be required to file a tax return.
posted by sarah_pdx at 3:11 PM on August 20, 2013 [1 favorite]

As far as handling the money... We had a separate bank account that was used only for team money.

We gave the treasurer and president authority to access account funds.

The account was in the name of the team, but had the treasurer's address on the checks.

Any administrative change to the account required a letter for the board of directors of the team.

I think there may have been some aspect of "DBA" (Doing Business As) involved.
posted by sarah_pdx at 3:21 PM on August 20, 2013

Our treasurer kept finances "transparent" by constantly updating the board on what funds were in the account, and on major deposits/expenses. Our treasurer maintained a ledger in an excel spreadsheet that was available for any board member to look at. Maintaining an air of transparency seemed to keep the level of trust high.

There is no avoiding the fact that an organization has to trust its treasurer. It's the job of the rest of the board to sanity check the balances and major deposits/expenses to make sure it roughly makes sense.
posted by sarah_pdx at 3:27 PM on August 20, 2013

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