Making an Organization

Who Owns the Camera.

Before you go out and spends money on expensive equipment, you will have to answer this question: who will own the equipment? If neighbor Smith buys a camera and mounts it on neighbor Jones’ house which has the best location, can Smith take the camera with him when he moves?  Can Jones?

We are neither lawyers, tax attorneys nor CPA’s – the following is NEITHER legal advice NOR tax advice, the following information is only provided as an aid in your own independent decision.

We found for our organization that making an unincorporated non-profit homeowners association was the easiest way to solve the ownership issue.
Unincorporated homeowners associations are described in “California Revenue and Taxation Code Section 23701t“, See the entire 23701 section here: Attorney General Rev Tax code.

It seems that Unincorporated Associations can but is not required to file with the state of California under the Corporations Code 18200-18220 for the purpose of providing an address of service. If you choose to make such a filing and pay the fee then the form and instructions are here http://www.sos.ca.gov/business/other/forms/ua-100.pdf

It seems that Unincorporated associations are legal entities under California Corporations Code section 18250-18270 and DOES provide SOME liability protection. Note: It is likely that the rules of other states are DIFFERENT.

Incorporating should increase your liability protection, while increasing your paperwork. Discuss with your lawyer.

NOTE: Incorporating and having all kinds of liability protection will NOT protect you from getting sued. Anybody can sue anybody over anything. It will however SIGNIFICANTLY DECREASE the likelihood that a plaintiff can get a judgement against you. (e.g. Win in court). Buying a “Directors and Officers (D & O) Liability insurance” for non-profits, should hopefully pay for your legal representation while you fight a lawsuit.

Taxes: While unincorporated home-owners associations are liable to taxes, they should only be liable IF they have taxable income (think: bake sale). Membership fees and dues are NOT taxable income according to  23701t (c) (1) – (2)

The advice above is NEITHER legal NOR TAX Advice and should not be treated as such, please consult with your own counsel.

 

Bank account.

Opening a bank account in the name of your unincorporated homeowners association required aBoard, a Treasurer and a set of Bylaws (requirements vary by bank)

Some banks treats a home-owners associations as a commercial enterprise with associated fees :-(,
Other banks insist on making the account a private account and tie it to a named board member, which is not ideal either.

After talking to a number of local banks we found the local Well Fargo understanding of our needs. It probably helped that our treasurer had a long-established relationship with them.

Board

Most institutions that you will interact with expect you to have the following 3 officers:

Chairman, The person who represents the organization outwards, typically the “face” of the organization. It helps to elect someone who is outgoing and that everyone in the neighborhood knows, likes and respects.

Treasurer, This is the person who is in charge of the money and the bank account, you want someone who is careful with money, especially since it will be partly your money.

Secretary, The person who keeps the records and make sure forms are filed on time, takes notes at meetings. Pick someone who is organized for this position.

3 Officers is typically the minimum and sufficient for small organizations, We have a large neighborhood decided to have more elected officials.

Crime Fighting Leader, the driving force behind cameras and other initiatives.

Emergency Coordinator Since we live in earthquake territory we decided to have a special person coordinate the emergency preparedness effort.

Block Captains: We then had our Block Captains as Board members.

Bylaws

The Bylaws is the way you ensure the democracy of the organization. Strong and robust bylaws make for long-lasting and healthy organizations. It is a very healthy exercise for a new organization to have good and long discussions about the bylaws. The bylaws are your constitution, they decide how you elect your officials and how you regain control of your organization when it is going in a different direction than what your members want.

The most important clause in your bylaws are how to change the bylaws, if this is right then you can fix anything down the road. It should be hard but not too hard to change the bylaws.

I have been in a number of organizations where bylaw discussions are a cornerstone of the constant improvement spirit.

When we wrote our bylaws our worst fear was the stereotypical dictatorial Homeowners association, that would end up telling us the color of our house and the type of front lawn. We went to great length trying to design an organization that could not be hijacked easily for this purpose. We did this for two reasons, 1) We wanted to keep the organization out of how telling us what to do. 2) We were sure that our neighbors felt the same way about homeowners association.
This is the primary reason we ended up calling our organization a “Neighborhood Organization” instead of a “Homeowners Association”.
By talking about residents and neighborhood instead of homeowners, we indicated that we wanted to include renters in our organization.
Using words like “Leadership Council” instead of “Board”, and making the bylaws very short (2 pages) is additional ways to try to make our organization sound less bureaucratic.

You will find a sample set of bylaws that are you can use as a starting point for your own bylaws work in the next article Sample Bylaws on this blog. The sample set is derived from our own bylaws.

Membership, Dues and Donations

As an organization created for the purpose of neighborhood security, it was very important to be all-inclusive, and get all the neighbors involved. So we made membership, voluntary and free!
The committee writing the new Bylaws felt that a mandatory membership and yearly fixed dues would turn some neighbors away.

We then decided that we would make the size of the dues optional, so that people could pay according to their ability and interest in a particular project.

Size of due would NOT influence the decision process. (1 due = 1 vote)

Due / donations to an unincorporated homeowners association is NOT tax-deductible, unless your organization has been awarded 501(c)3 Tax-exempt status. Read more here

please consult with your CPA for tax advice regarding your taxes.

Enjoy and good work on getting your own democracy working.

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