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Make it Official

Congratulations! By now, you’ve likely decided as to the type of legal entity you want to form. You may have chosen the corporation, or you may have chosen the limited  liability company (LLC). Regardless, the next steps are identical.

Articles of Incorporation (Corporation) or Articles of Organization (LLC)

This is a legal document and must be filed with your state government. The requirements vary from state to state. As we’ve suggested before, consult an attorney for guidance here. Spending some money during this step can save you massive headaches down the road.

If, however, you choose to do it yourself, the forms are generally available online. Try the office of the Secretary of State or the Comptroller.  That’s usually where you’ll find them. Most come with step-by-step instructions. Still, and this is going to sound familiar, it’s a good idea to talk to an attorney.

Bylaws 

Bylaws govern how the club will function as an organization. They describe the roles and responsibilities of the directors and/or officers, the terms for those positions, and how they are elected. They’ll also detail when board meetings take place and how often general membership meetings must be held. In addition to spelling out the duties of the president, vice president, etc., you may wish to include a maintenance officer, a safety officer, a social officer and others as necessary. Those duties also should be clearly defined. Bylaws are the foundation upon which your club is based.

Your bylaws, or perhaps a separate addendum, should address financial issues such as initiation fees, monthly dues, and how the hourly rate for the airplane is calculated. Don’t forget to address what happens if there is damage to the airplane. Who is responsible for the deductible?

What happens if a member resigns or if a member becomes delinquent? Delinquent payments are rare, but they do happen. Membership changes, too. Having well-defined policies in writing makes handling these things much less stressful and less personal should they arise in the future

Operating Rules (also called Standard Operating Procedures, or SOPs)

SOPs are not the same as bylaws. Well-written SOPs will cover day-to-day operations and more routine things like how the airplane is scheduled and how often, or how far in advance a member may schedule the airplane. They’ll also cover general flight rules under which the aircraft must be operated, how maintenance issues are handled, and insurance. In short, your SOPs establish the “operating culture” of your flying club.

Things to consider when writing your SOPs should include, but aren’t limited to:

  • How maintenance items are squawked and repaired
  • How to handle repairs if a breakdown occurs at an airport away from home
  • How much fuel should be in the tanks when a member is finished with the plane
  • General housekeeping guidelines such as making sure that cups, bottles, and other trash is removed from the plane after each use
  • Proficiency requirements
  • Airport restrictions, for example, grass strips
  • International travel guidelines
  • Correct tie-down or hangar procedures

Federal Tax ID/Employee Identification Number (EIN)

To open a bank account, or to file your club’s tax return with the IRS, you’ll need an EIN.  You can get this number online from the IRS. The process is pretty simple.  

Here’s a link to the IRS web site where you can apply for the EIN:

https://www.irs.gov/businesses/small-businesses-self-employed/apply-for-an-employer-identification-number-ein-online 

The entire process takes just a few minutes and, at the end, you can choose to receive your EIN electronically, in which case it will be issued on the spot.

If you intend to open a bank account in the club’s name, most banks will require an EIN.  Some banks may also require a DBA (Doing Business As). You can get this from your county clerk. Costs vary, but it’s usually just a few dollars and takes about 15 minutes.

In the State of Texas, for example, you can apply for a DBA online with the state. There is a small fee. You may also choose to apply in person with the county clerk. 

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