Do I need a tax id number

Sutterdkim said:

I just started my own team and its the first time that I will be coaching when I'm not under another organization. I'm planning on getting sponsors so I need to know what I need to do about a tax id

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You should also consider that a "team" is much different than an "organization". The last time I checked, there was a fee required to register as a 501 (don't remember what the cost was, sorry). If you have an "organization", you have several teams that can split that cost. If you have a "team", all the cost is yours alone. You should factor that into your decision.

Obviously, check with an accountant or tax attorney, but you probably will need a tax id for the team to avoid having dues/sponsorship monies count as personal income.

You will DEFINITELY want to use some kind of legal entity to form your team/organization, if for nothing else, to insulate your personal assets from a lawsuit.

The type of legal entity depends on how you want to handle tax status...

If you go 501c 7, you will not be the Owner, you will be a member of the Board of Directors, and are afforded some liability protection... consult a attorney for specifics in your state.

Regardless, your organization will need a tax ID.

FP26 said:

You should also consider that a "team" is much different than an "organization". The last time I checked, there was a fee required to register as a 501 (don't remember what the cost was, sorry). If you have an "organization", you have several teams that can split that cost. If you have a "team", all the cost is yours alone. You should factor that into your decision.

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Three years ago when DD team filed to be a 501(c)(3) it cost us $1,200.

Edited to add:
Also it may be worth looking into who your players parents work for before making a decision. Ex. One young lady on DD's team father works for a company that will donate 5K/year for doing a certain amount of volunteer work with a 501(c)(3) charitable organization. Since the team is 501(c)(3) the team gets 5K/year just for him helping out

When I formed the IOMT Castaways, my banker advised me to register as a not-for-profit corporation. This is the in the State of Illinois. It was a simple online form for a low amount. The reason was to protect my personal finances and keep them separate from the team finances. She highly recommended that before I opened a bank account. I elected not to pay the extra to become a 501(c)3 because I figured it was only for a year.

The only issue was when it came time to file taxes. I had to even though it was not-for-profit. Had it been a 501(c)3 I would have just had to send in a simple form as I recall. So that's something to think about as well. You will need to file a business form, and the deadline is different than personal taxes. As I found out the hard way.

A couple of things.....
1. There is a difference between a 501c3 and a 501c7. There are actually a lot more than just those 2, but they don't apply here. Good luck getting a 501c3 filing status. I'm not too sure how you'd be granted that unless your club had some underlying charitable mission that a normal club would not.
2. Unless you want to pay federal taxes on the $$ you bring in, you need to file for a 501c7, and I believe the filing fee is $425, or something along those lines.

Before you do that, however, here is what you should do:
1. Create your Articles of Incorporation (don't think too much on these, and I'm sure you can find examples on-line)
2. Create a set of Bylaws (again, you can find these on-line)
3. Register as a tax exempt corporation with your state. It will probably cost $25-$50, and you will most likely need items 1 and 2 above (which is why I listed those first)
4. Set-up a separate bank account for the organization (you'll have to be listed as an officer in some sort of official manner).
5. File your paperwork with the IRS to become a 501c7.

Easy as pie, right???

I came upon the same situation when a team I now coach was started. The HC at the time (2014, I was the AC) paid for everything out of pocket. Then in 2015 I took over and talked to the lady who does my taxes, and she gave me the advice on what to do:
1.) Went to the bank and set up a business checking account in the name of the team I coach, which came with checks/business debit card in the same name.
2.) Went to the county offices and created a DBA for the same team name.
3.) Stated in donation letters that our team is not a "not-for-profit organization"; that "any money donated to/raised by the team is to be strictly used for purposes related to team activity ONLY, and that our ledgers could be available for verification at any time (I live in a small town of about 5,000 people, it's very local business based, nobody's asked yet.) Any businesses that asked about that were told we are NOT a 501 at all - money donated would be considered advertising expenses by the donating entity.

Right now we're looking at ideas for our 4th season for fundraising. We're looking at going business-to-business for donations as a team/players in the Spring. We've also considered a Father's Day car wash/bake sale, possibly a Home Run Derby for our youth baseball/softball organization, and I'm trying to find other ideas that would be easy to do that don't take a ton of time. What we've found to be troublesome is that many places don't want involvement with us because we're not a 501 organization.