Parents Booster Club

[Spauley0315]

Hello,

We are a small gym (27 competitive gymnasts total) and us parents really do not want to have a non profit booster club. I have read too many horror stories on here and it sounds like so much work. For those that have decided the same, what entity are you all setup as? An LLC? Or do you just have a separate bank account under the gym name and keep all team funds separate?

Please help!

 

[gym_dad32608]

I dont understand, are you asking about setting up a booster club or an alternative to a booster club. Booster organizations are generally set up as a 501(c)3 - charity organization or 501(c)7 - social club, which both have distinct requirements. The (c)3 is the NFP one with tax benefits. The (c)7 is also a NFP but no tax benefits. Setting up as an LLC requires a whole other level or legal and reporting requirements.

Bottom line, STAY AWAY FROM ANY TYPE OF BOOSTER CLUB! IF I was hellbent on creating some type of "club" I would go the (c)7 route which allows you to charge dues.

 

[Seanydad]

Hello!
We are an active Not for Profit, but are not 501(c)3. This doesn't come with tax-exempt benefits like a 501(c)3 does, but gives us some flexibility.
Annually, we provide our gym with a report of all our finances - including all receipts and all payouts. Our "payouts" are based on how much a gymnast participates in the fundraiser, and are applied directly to the gymnasts tuition account through our Gym. We usually do an 80/20 split, so any profits from the fundraiser, 80% will go to the gymnasts account, 20% will come to the booster club which funds our annual awards banquet.
It sounds like a model similar to our gym would be the best option for your smaller gym. My biggest issue is lack of participation from the families.

 

[Spauley0315]

I dont understand, are you asking about setting up a booster club or an alternative to a booster club. Booster organizations are generally set up as a 501(c)3 - charity organization or 501(c)7 - social club, which both have distinct requirements. The (c)3 is the NFP one with tax benefits. The (c)7 is also a NFP but no tax benefits. Setting up as an LLC requires a whole other level or legal and reporting requirements.

Bottom line, STAY AWAY FROM ANY TYPE OF BOOSTER CLUB! IF I was hellbent on creating some type of "club" I would go the (c)7 route which allows you to charge dues.

Thank you, this is exactly what I wanted to know. I see a ton of talk about the 501(c)3 but hadn't heard of the 501(c)7. We do not want to go the booster club route.

 

[Spauley0315]

Hello!
We are an active Not for Profit, but are not 501(c)3. This doesn't come with tax-exempt benefits like a 501(c)3 does, but gives us some flexibility.
Annually, we provide our gym with a report of all our finances - including all receipts and all payouts. Our "payouts" are based on how much a gymnast participates in the fundraiser, and are applied directly to the gymnasts tuition account through our Gym. We usually do an 80/20 split, so any profits from the fundraiser, 80% will go to the gymnasts account, 20% will come to the booster club which funds our annual awards banquet.
It sounds like a model similar to our gym would be the best option for your smaller gym. My biggest issue is lack of participation from the families.

Hello! So it sounds like your gym uses the 501(c)7 only for fundraising? We are looking to have the the 501(c)7 handle all competitive things. Such as pay for competition fees, coaching fees, travel costs, etc. Is this a bad idea?

 

[Seanydad]

Hello! So it sounds like your gym uses the 501(c)7 only for fundraising? We are looking to have the the 501(c)7 handle all competitive things. Such as pay for competition fees, coaching fees, travel costs, etc. Is this a bad idea?

I honestly am not sure. Our gym is adamant that any parent payouts need to go through their account. So I could see that working for everything but travel costs.

 

[Spauley0315]

I dont understand, are you asking about setting up a booster club or an alternative to a booster club. Booster organizations are generally set up as a 501(c)3 - charity organization or 501(c)7 - social club, which both have distinct requirements. The (c)3 is the NFP one with tax benefits. The (c)7 is also a NFP but no tax benefits. Setting up as an LLC requires a whole other level or legal and reporting requirements.

Bottom line, STAY AWAY FROM ANY TYPE OF BOOSTER CLUB! IF I was hellbent on creating some type of "club" I would go the (c)7 route which allows you to charge dues.

The 501(c)7 sounds like a better deal. Are we able to do things like split up fundraiser money based on participation , assist gym with new equipment purchases, pay for competition fees, etc? We are in WA state if that helps at all.

 

[gym_dad32608]

Fact/Textbook - Talk to a tax attorney/accounts specialed in NFPs to get the appropriate legal advice on how to remain legally compliant.
Reality when it comes to booster clubs - I would estimate that 95% of gym booster clubs are non-compliant with their organization status. And I would say the 94% of those dont care/dont worry about it. Very few cases have been pursued by the IRS or state entities, but there are a few out there. Most gyms just shrug and say "we are only talking about 10-20k here, is the IRS really going to care?" The problem is there is always that one parent and that one parent in theory has a case if they want to take it to the nTh degree (remember we are talking about crazy gym parents here). A c3 as a charitable organization organized for the benefit of the community CANNOT require members to volunteer in order to benefit from the charity. So as a c3 you could not say only parents who volunteer get to benefit, the benefit has to be equally applied to ALL gymnasts. A c3 also CANNOT inure benefits to a for-profit entity. So raising money for the booster club to buy capital equipment for the for-profit gym is also not allowed. Also NEVER EVER should a gym owner be involved in the administration of the c3 booster club. Doesnt take much to see the conflict of a for profit owner influencing the NFP booster club to benefit his/her gym. Here is story on Capital City Gymnastics that got hit by IRS for inurement

Most country clubs or tennis clubs are organized as a c7. A c7 benefits a social club, it can charge dues in order to belong to it. It can purchase capital equipment to benefit the club. The downside is that donations to it are not tax-deductible (although I believe donations to c3 are more limited on their deductions now). There are also different reporting requirements and could get trickier if you live in a state with a state tax. Again talk to a professional in this area. But honestly, booster clubs tend to be more headaches than benefits for both the parents and gyms. That is not to say some are genuinely successful, but overall they just are a pain.