What does one need to know about starting an association?
June 1, 2018 3:33 PM Subscribe
Is there any thing you need to know when starting your own association? For example, let's say it's called "World Association of People Who Do What I Do for Work," or WAPWDWIDW, and you've set up a website, you put together a newsletter, and have an option to join and pay membership dues. It's for-profit, but you don't anticipate making more than a few hundred bucks a year for the next few years. What else needs to be done? What needs to be known about? Thanks!
Well, you're probably going to want to incorporate for many reasons, the most obvious being that few people are going to feel comfortable writing a check to Joe Circular for membership in a professional organization.
posted by praemunire at 3:58 PM on June 1, 2018 [1 favorite]
posted by praemunire at 3:58 PM on June 1, 2018 [1 favorite]
Take a look at the IRS's new simplified 501(c)3 application process for very small nonprofits that handle under $50k/year- their press release mentions things like gardening clubs as an example of what it's for. This might be useful to you. I think it's something like form 123EZ or something like that.
posted by twoplussix at 4:14 PM on June 1, 2018 [1 favorite]
posted by twoplussix at 4:14 PM on June 1, 2018 [1 favorite]
Response by poster: Thanks for the comments so far everybody! I hope you won't mind if I push back a bit, just to get as much help as possible here:
> you'll need to open a bank account for WAPWDWIDW
> few people are going to feel comfortable writing a check to Joe Circular
Using an online payments system which simply gives my email address and name, would this separate bank account really be necessary? I'd have a separate category for these payments in my accounting software. I'm assuming there's no legal obligation for a separate bank account. (Pushing back because making this an official legal entity seems like a lot of plumbing to maintain for such a small endeavor, and I get the sense that there is some leeway here.)
posted by circular at 5:13 PM on June 1, 2018
> you'll need to open a bank account for WAPWDWIDW
> few people are going to feel comfortable writing a check to Joe Circular
Using an online payments system which simply gives my email address and name, would this separate bank account really be necessary? I'd have a separate category for these payments in my accounting software. I'm assuming there's no legal obligation for a separate bank account. (Pushing back because making this an official legal entity seems like a lot of plumbing to maintain for such a small endeavor, and I get the sense that there is some leeway here.)
posted by circular at 5:13 PM on June 1, 2018
If you want to treat the association like a small Schedule C for-profit business (at least in the US) that would give you the lowest overhead but it means the business is associated with you personally. You would need to show all of the money coming in as income on your taxes and all of the associated expenses as business expenses. Whatever net positive income would be taxable to you personally.
If there is much money coming in and out (in terms of number of transactions as well as quantity) you will really want to be able to be clear about that for accounting/tax purposes. This might mean having everything go in and out of a PayPal account and only using the linked bank account when something becomes your personal money or even opening a separate personal checking account just make it cleaner.
The other dimension is what kind of relationship you want to have with the others involved. Do you want them to have a sense of ownership and control or just be participants? Would it make sense to them that this is your gig? (Example - payments go to you personally) Incorporating as a nonprofit creates a different relationship with others as well as offering you a much higher level of protection from liability.
The next step up is a dba ("doing business as") where you are still a small business but you can put yourself out there as WAPWDWIDW, instead of J. Circular. You can also open a checking account for WAPWDWIDW, that would more fully separate the money for accounting purposes but you would still be personally liable both in the legal and tax sense.
posted by metahawk at 5:48 PM on June 1, 2018
If there is much money coming in and out (in terms of number of transactions as well as quantity) you will really want to be able to be clear about that for accounting/tax purposes. This might mean having everything go in and out of a PayPal account and only using the linked bank account when something becomes your personal money or even opening a separate personal checking account just make it cleaner.
The other dimension is what kind of relationship you want to have with the others involved. Do you want them to have a sense of ownership and control or just be participants? Would it make sense to them that this is your gig? (Example - payments go to you personally) Incorporating as a nonprofit creates a different relationship with others as well as offering you a much higher level of protection from liability.
The next step up is a dba ("doing business as") where you are still a small business but you can put yourself out there as WAPWDWIDW, instead of J. Circular. You can also open a checking account for WAPWDWIDW, that would more fully separate the money for accounting purposes but you would still be personally liable both in the legal and tax sense.
posted by metahawk at 5:48 PM on June 1, 2018
Depends on where you are. Here In SF for example you need a business license. ( or possibly “need” in scare quotes because I’m not sure anyone checks if you have no storefront or employees. In my previous city I didn’t need one.)
posted by phoenixy at 6:19 PM on June 1, 2018 [1 favorite]
posted by phoenixy at 6:19 PM on June 1, 2018 [1 favorite]
Using an online payments system which simply gives my email address and name, would this separate bank account really be necessary
Look, I'm not trying to suggest that you, personally, are shady, but...most people are not going to think of making payments to you, personally, directly, as particularly professional and inspiring of trust. (metahawk gets into some of the other reasons.) I would be astonished to find, when I was paying dues to some professional organization, that they were going to J. Circular personally. In fact, I would be concerned that it might be a scam. It certainly implies an extremely low degree of sophistication that would not lead me to have confidence in a new organization.
posted by praemunire at 10:08 PM on June 1, 2018
Look, I'm not trying to suggest that you, personally, are shady, but...most people are not going to think of making payments to you, personally, directly, as particularly professional and inspiring of trust. (metahawk gets into some of the other reasons.) I would be astonished to find, when I was paying dues to some professional organization, that they were going to J. Circular personally. In fact, I would be concerned that it might be a scam. It certainly implies an extremely low degree of sophistication that would not lead me to have confidence in a new organization.
posted by praemunire at 10:08 PM on June 1, 2018
I don't mean to derail, but you can set up a totes professional looking PayPal merchant account for a business without having that business actually legally exist as a separate thing from you. I guess you might need to establish a FBN (also known as a DBA) but I don't recall PayPal ever asking for evidence that we had one. We've been running a business for quite some time and in 15+ years I think only one organization has ever asked to see proof of the business name -- that was the issuer of our SSL certificate.
posted by phoenixy at 10:37 PM on June 1, 2018 [1 favorite]
posted by phoenixy at 10:37 PM on June 1, 2018 [1 favorite]
This thread is closed to new comments.
posted by bunderful at 3:49 PM on June 1, 2018 [1 favorite]