| Wednesday, February 1, 2017
When you first establish your coach-owned program you may only need a very informal group of willing volunteers. However, as your program grows, it is likely that you will need a more formal structure. Here you have two choices:
- A non-incorporated Booster Club.
- A formally incorporated 501(c)(3) Booster Club.
non-incorporated Booster Club
A non-incorporated booster club can still have by-laws, officers and procedures. It just has no formal recognition from the state as a legal entity. The organization could set up its own checking account and requirements for volunteering. It can run fundraising and other supportive events. Money donated to this type of booster club would not be tax deductible for the donor. Any major financial transactions would be through the coach's business, whether an LLC or a Sole Proprietorship.
incorporated 501(c)(3) Booster Club
A formally incorporated 501(c)(3) booster club must follow the rules and requirements for establishing a non-profit organization. It would be a tax exempt organization and fundraising donations would be tax deductible for the donor. The organization would need to be incorporated, file tax returns, have a board of directors and formal by-laws. For more information on establishing a nonprofit organization, see the section on Parent Owned Clubs. (Note that the main difference is that with the coach-owned team, the booster club does not employ the coach or set the team's mission. It does, however, need to establish its own charitable mission.)
The "catch" in incorporating a booster club is that its mission or purpose CANNOT be to support the coach's business. It must have a charitable mission and, unfortunately, the coach is not a charity!
Here is the wording from the IRS:
To be tax-exempt under section 501(c)(3) of the Internal Revenue Code, an organization must be organized and operated exclusively for exempt purposes set forth in section 501(c)(3), and none of its earnings may inure to any private shareholder or individual. In addition, it may not be an action organization, i.e., it may not attempt to influence legislation as a substantial part of its activities and it may not participate in any campaign activity for or against political candidates.
Organizations described in section 501(c)(3) are commonly referred to as charitable organizations. Organizations described in section 501(c)(3), other than testing for public safety organizations, are eligible to receive tax-deductible contributions in accordance with Code section 170.
The organization must not be organized or operated for the benefit of private interests, and no part of a section 501(c)(3) organization's net earnings may inure to the benefit of any private shareholder or individual. If the organization engages in an excess benefit transaction with a person having substantial influence over the organization, an excise tax may be imposed on the person and any organization managers agreeing to the transaction.