Author Topic: 501(c)(7) Why?  (Read 3639 times)

Offline Nemleu

  • 1st Kit
  • *
  • Posts: 6
    • View Profile
501(c)(7) Why?
« on: March 20, 2013, 02:53:43 AM »
I've read that if your average annual revenue is under $5,000 (calculated on a 5 year average), you can operate as a self-declared 501c7 without actually seeking IRS approval. If you anticipate your average exceeding $5,000, you will need IRS approval lest you find your organization considered taxable.

Our club is small and we just want to share brewing experiences, techniques, and spread the word about this fantastic hobby.  Several of our members don't brew they just want to learn about craft beers and unique styles.  We don't want to file a form 1023, keep minutes, or deal with red tape.  Creating a nonprofit organization takes time, effort, and money.   A nonprofit must keep detailed records and submit annual filings to the state and IRS by stated deadlines in order to keep its active and exempt status. 

We can’t be the only club that feels this way.  Have you heard the term “Self declared 501c7?”

Offline tygo

  • I spend way too much time on the AHA forum
  • ********
  • Posts: 2622
  • Sterling, VA
    • View Profile
Clint
Wort Hogs

Fermenting: Wit
On Tap: Lucifer's Hammer Golden Strong Ale, Dopplebock, Old Fuzzynut's Ale

Offline mtnrockhopper

  • I spend way too much time on the AHA forum
  • ********
  • Posts: 2878
  • Delaware
    • View Profile
Re: 501(c)(7) Why?
« Reply #2 on: March 20, 2013, 05:50:38 AM »
Have you heard the term “Self declared 501c7?”
I don't think it's an official designation, but it's also called "under the radar". The main reason to do this is to limit the liability of organizers. If you organize a club meeting and somebody gets drunk and kills someone - that person's family will probably sue everybody they can. Your personal assets may be on the line - house, car, bank accounts, etc.  As a 501(c), only club assetts are at risk. You'll get tax benefits too, but for a small club I don't think that will have much impact.
Jimmy K

Delmarva United Homebrewers - President by inverse coup when the old president ousted himself.
AHA Member since 2006
BJCP: B0958

Offline a10t2

  • Official Poobah of No Life.
  • *
  • Posts: 3163
  • Ask me why I don't like Chico!
    • View Profile
    • SeanTerrill.com
Re: 501(c)(7) Why?
« Reply #3 on: March 20, 2013, 11:25:39 AM »
Is the nonprofit part important? In most states setting up an LLC is pretty trivial.
Beer is like porn. You can buy it, but it's more fun to make your own.
http://seanterrill.com/category/brewing/

Offline Nemleu

  • 1st Kit
  • *
  • Posts: 6
    • View Profile
Re: 501(c)(7) Why?
« Reply #4 on: March 20, 2013, 03:11:24 PM »
Thanks for all of your input.  Our club is 5 years old and we haven’t taken the time to dot the I’s and cross the T’s.  As a newly elected officer I (we), want to make sure we are within the guidelines of the IRS.
 
At this time we just don’t see the need to file a form 1023 to get the 501(c)(7).  It appears that if we can stay “under the radar” we can accomplish that.

I very much appreciate hearing the pros and cons.  I’m sure there are many small clubs that are seeking guidance that the AHA and its members can offer.  Advice and suggestions are very much appreciated.

Offline mtnrockhopper

  • I spend way too much time on the AHA forum
  • ********
  • Posts: 2878
  • Delaware
    • View Profile
Re: 501(c)(7) Why?
« Reply #5 on: March 20, 2013, 03:37:16 PM »
Jimmy K

Delmarva United Homebrewers - President by inverse coup when the old president ousted himself.
AHA Member since 2006
BJCP: B0958

Offline Nemleu

  • 1st Kit
  • *
  • Posts: 6
    • View Profile
Re: 501(c)(7) Why?
« Reply #6 on: March 21, 2013, 02:54:59 AM »
Thanks mtnrockhopper.  We checked into liability insurance, and it's unattainable at the meir $24 per year membership dues.  We only have 38 members.  The last time I checked it would cost us around $400 to file a form 1023 alone.

Offline mtnrockhopper

  • I spend way too much time on the AHA forum
  • ********
  • Posts: 2878
  • Delaware
    • View Profile
Re: 501(c)(7) Why?
« Reply #7 on: March 21, 2013, 05:31:56 AM »
I hear ya on that.
Jimmy K

Delmarva United Homebrewers - President by inverse coup when the old president ousted himself.
AHA Member since 2006
BJCP: B0958

Online reverseapachemaster

  • Brewmaster
  • *****
  • Posts: 910
    • View Profile
    • Brain Sparging on Brewing
Re: 501(c)(7) Why?
« Reply #8 on: March 24, 2013, 12:18:41 PM »
Have you heard the term “Self declared 501c7?”
I don't think it's an official designation, but it's also called "under the radar". The main reason to do this is to limit the liability of organizers. If you organize a club meeting and somebody gets drunk and kills someone - that person's family will probably sue everybody they can. Your personal assets may be on the line - house, car, bank accounts, etc.  As a 501(c), only club assetts are at risk. You'll get tax benefits too, but for a small club I don't think that will have much impact.

Designation as a non-taxable entity has no bearing on anybody's liability except for the payment of taxes on the club's receipts.
Heck yeah I blog about homebrewing: Brain Sparging on Brewing but I'm also a lawyer: The Kielich Law Firm

Offline Bruce B

  • Cellarman
  • **
  • Posts: 98
  • Overcome, Improvise, Adapt.
    • View Profile
    • Bruce's Brewing Adventures
Re: 501(c)(7) Why?
« Reply #9 on: March 24, 2013, 07:28:15 PM »
Actually, because of our non-profit status we're able to obtain an umbrella policy for our officers.  That might not be a big selling point for smaller clubs but it might be for larger ones.
Prosit, Sláinte, Salute, Na Zdravi, Cheers! - Bruce
Beer Barons of Milwaukee - http://www.beerbarons.org
Coordinator - Midwinter and Schnapp Hans Cup Competitions
BJCP National & Mead Judge