USA Swimming News

Tuesday, February 7, 2017

Coach Owned-Business Structures

You have several options in deciding on your corporate structure. There are advantages and disadvantages to each one and you should pick what works best for your situation. Make sure to get legal and financial advice before making your final decision. Different people will expound the virtues and advantages of one form of business and the pitfalls of another. Opinions are personal, but "facts" are "facts".  You need to seek out coaches who have done it one way and those who have done it the other. Get all of the case history you can, not in a deck-side conversation, but in detail.

There are three general types of ownership models:

  • Sole proprietorship or partnership. This is the simplest form of business to establish. There is no initial set-up cost; the business can be established online. However, all finances including profits and losses are tied to the coach’s personal income and taxes. All risk and liability is assumed by the coach. This is not an advisable form of business for a coach who plans to grow into a large organization with multiple employees. In fact, in a sole proprietorship or partnership, employees must be independent contractors and meet the requirements associated with independent contractor status. Check with an attorney. It is also more difficult to entice parent volunteers since profits from their effort go to the coach’s personal business rather than to the team general fund.
  • Sub-s or LLC (Limited Liability Corporation). The coach is the CEO of the corporation. A separate 501c3 not for profit that acts as a booster board can be formed although it must have a stated purpose other than just to support the coach’s for profit corporation! The for profit corporation contracts pool rental or owns the facility. The corporation can also hold a retail sellers license for swim shop related business, selling to the swimmers on the team.
  • 501(c)(3) This is the type of structure that most parent governed clubs use. The Head Coach can be CEO of the club and president of the 501(c)(3) Not for Profit Corporation. The coach cannot personally totally control or own this type of club. It is required by law to be board governed although the board does not have to be composed of parents. We have heard of instances where family, friends and supporters can be the board members, but we would highly encourage anyone considering this avenue to seek legal advice. However, the coach is still an employee of the board. Parents are also needed in voluntary positions even if they are not on the board. In some states the swim club as a 501(c)(3) corporation does not automatically exempt them from real estate taxes. An attorney can guide you. While not for profits have their advantages, please keep in mind no one can personally own a not-for-profit 501(c)(3) corporation.
Type of Business Sole-proprietorship or partnership  Sub-S or LLC   501(c)(3)
 Who owns & directs Single ownership   Can be coach owned
  • Board owned-cannot be individually owned 
  • All equity is controlled by BOD
 Coaches' Role
  • One person show for a small club or 2 coaches form a partnership
  • All profits (and losses) are claimed on coach's individual tax return
 Coach/owner hires all staff and sets business philosophy
  • Hired by BOD-paid by BOD
  • Contract very important
 Parents' Role Volunteer committees-no voice, no governance 
  • Usually a booster club or a working committee structure led by coach
  • Parents can be allowed to form a separate 501(c)(3) with coach on BOD as officer
  • Usually make up the BOD as officers-annual voting according to by-laws
  • Business officer (generally the treasurer) collects all fees and pays all salaries & bills
  • Simplest form of a business
  • No IRS initial cost to form
  • The booster club (if formed) could raise funds
  • Corporation is liable
  • Finances run through corporation not through coach's personal finances
  • Coach may be on BOD with vote or ad-hoc with voice only
  • Fundraising may be tax-deductible for donors
  • Coach is an employee-limited liability
  • Finances are run through BOD. Coach may have employee benefits
  • Coach is personally liable
  • Finances tied directly to personal income tax, etc.
  • Harder to get parent volunteers to support coach's personal business
  • No tax-deductible fundraising opportunities - business strictly for profit
  • Fundraising may not be tax deductible to donor
  • Harder to get parent volunteers to support coach's personal business
  • Legal requirements and paperwork to establish
  • Coach is responsible for all aspects of the business
  • Must have a BOD
  • Coach is a paid employee of BOD
  • Harder for coach to set philosophy and mission


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