 
How and Why Your
Coin Club Should
Incorporate Itself
by David L. Ganz
Column 1 - March 17, 1999
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Suppose that your coin club has a show once a year, but meets monthly at a local church or library where coffee and donuts are served, coins exhibited, and stories exchanged. Pretty typical, right?
Now suppose that your club also has an annual benefit auction and a monthly newsletter put together by a volunteer editor. It has four officers (President, Vice President, Secretary, Treasurer) and five directors, all volunteers.
This probably sounds like most of the 600 coin clubs that are members of the American Numismatic Association, and probably a thousand or so others that are not. It's typical, and, if it's not incorporated, or a non-profit limited liability company, your coin club is a liability waiting to happen.
Monetarily, it's a liability that could prove costly to the officers, the directors, and even the members -- and maybe even to someone visiting the club for just one night.
Clubs that are not incorporated are mere associations, a confusing area of the law since an association cannot exist in the absence of its members. (A corporation has an independent existence that can be perpetual, or for a limited period of time).
In Texas, a member of an unincorporated association can bring a negligence claim against the association, and reach the assets of the organization held either in its own name, or by a member as trustee.
In Missouri, one 1937 case declined to permit creditors to seek payment of a judgment from individual members when the association could not pay; but in 1895, Massachusetts court permitted a creditor of an alumni group to go against the individual college grads for the cost of producing a yearbook that the organization had ordered.
Most states do not allow members of an unincorporated association to sue the organization for torts; but some do. Where a guest is injured, however, all bets are off, and the liability potential for the directors and officers, as agents, can be substantial. Fellow members, and even guests, can also be on the hook.
One good reason can be seen in a typical example. Suppose a member displays for show and tell an 1896-S Morgan dollar in uncirculated condition (selling for a couple of hundred dollars). During the coffee hour, a guest chokes on a donut which, it turns out, has a thumbtack in it that is swallowed. In the confusion, the valuable coin is missing, the guest goes to the hospital, and turns out to be uninsured.
The club treasury has $150 in it, and lots of fingers are pointing, especially when the guest asks that his medical expenses be reimbursed, and the member whose coin was stolen asks if the club would consider paying him for it.
In some states, the person who brought the donuts could have liability; the members present could have liability for the stolen coin; and the club itself could be the target of two expensive lawsuits that would have to be untangled and sorted out.
A considerable amount of this could be avoided if the club were incorporated, since the club corporation could have insurance (available from the American Numismatic Association on an inexpensive group plan), and, in any event, liability would most likely be limited to the club treasury. Here are ten key reasons why your club should consider incorporation as a non-profit organization:
(1) Limits liability for negligent acts by the club or its members.
(2) Offers protection to officers and directors for unanticipated aberrational actions of other officers or club members.
(3) Facilitates transfer of club assets to new bank accounts when there is a transition, requiring a mere corporate resolution signed by two officers and the Secretary.
(4) Continuous existence can be authorized. Some clubs have moments of inactivity, sometimes lasting for several months or years. A corporation's existence can be perpetual, keeping the club always in place, awaiting activity.
(5) Limits contractual liability (for bourse payments, purchases) to the organization, and not the individual member or officer.
(6) Offers protection to officers, guests, and members against acts of simple negligence.
(7) Permits for application for a federal tax number and convenient filling out of federal tax forms for income, expenses, losses.
(8) Allows for simple "special benefits" to be created for members, such as a group insurance plan, travel discounts, and group discounts in other fields.
(9) Minimizes the likelihood of a tax audit because it will be measured against other non-profit corporate groups.
(10) Gives officers and directors a level of comfort for their involvement. Inevitably, there are some negatives to undertaking such a form of existence. What are the down sides to incorporation? Here are several of them:
(a) Requirement for filing IRS and State (and sometimes City) tax forms on an annual basis; the unincorporated association should do this, also, but the requirement is widely ignored because the income is so minimal.
(b) Some states make forming a not-for-profit organization difficult. In New York State, for example, a State Supreme Court Justice must approve the application. (Other states merely require filing appropriate forms and bylaws with the Secretary of State of that location).
(c) Annual report requirements typically must be filed with each state.
(d) Most states charge even non-profit organizations minimum filing fees, which can be taxing to a small club.
Howard Oleck, the respected author of the 1632 page 6th edition of Nonprofit Corporations, Organizations & Associations (Prentice Hall, 1994, $110), summarizes his view thusly: "Corporate form is usually most desirable. When in doubt, incorporate."
Incorporation does not always require the assistance of a professional; neither does the filing of tax returns.
There are also professional services that will form non-profit corporations for you for relatively nominal fees. Among the best that I have found include:
Inc Plan USA
Trolley Square, Suite 26-C
Wilmington DE 19806
Telephone (800) 462-4633
Fax (302) 428-1274
Web Site: http://www.cyberhaven.com/IncPlan/
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David L. Ganz
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