Flyfunston

In June 2007 at the recommendation of Steve the Club incorporated as a for-profit corporation with the apparent intent that at a later date the Club would become a non-profit corporation. A for-profit is taxed. A non-profit is not taxed.

Incorporation provides a layer of financial protection for the personal assets of Club members and officers. Steve and perhaps others were uncomfortable serving as officers without the protection. I helped draft the Articles of Incorporation because I wanted them done right but declined to further assist since I considered incorporation unnecessary, complicated and expensive. The Club had operated for over 30 years without incorporation. I and many others some quite wealthy had served as officers satisfied that the various waivers, recreational use immunity statues and USHPA insurance policy provided sufficient protection.

There has been a trend among flying clubs to incorporate and our neighbors, BAPA, MCHGA and WOR, are incorporated. Sonoma apparently was incorporated but the incorporation lapsed.

At the May 2009 meeting Steve began the process of converting the Club to a non-profit asking the members to amend the bylaws by approving a new set of bylaws 32 pages long purchased for $800.00. The bylaws, however, were for a large organization; not a small club and transferred many basic rights from the members to the officer/directors allowing the officer/directors to make the rules, regulations, set the fees and even decide who could join the Club. I opposed the bylaws and using MCHGA’s bylaws as a model drafted four pages of bylaws preserving member rights. At the meeting the members endorsed my bylaws but made some minor modifications. Bylaw amendments require approval at two consecutive meetings and votes will be required at the June and July meetings. After bylaws are approved and an application prepared, the Club will ask the IRS to grant non-profit status.

At the May meeting I asked Steve and the Club’s Treasurer how much tax the Club would save by converting from a for-profit corporation to a non-profit corporation. Neither was able to answer. They could not answer because the Club as I recently learned has never paid taxes, filed tax returns or even prepared an annual statement.

I asked my accountant, a CPA, how much tax the Club should have been paying. He estimated the Club’s yearly tax bill as $950.00, $150.00 Federal and $800.00 California. California has a minimum corporate tax. Since it will be at least two years after incorporation before we are able to request non-profit status, the combined tax liability is $1,900.00 without penalties or late fees. When I asked Steve about the failure to pay tax, he said the Club would apply for a “retroactive exemption”.

For whatever reason the incorporation has not been done in a business like manner or followed the example of neighboring flying clubs. The application for non-profit status should have been filed immediately after the Club was incorporated eliminating the need to seek and the risk of not being granted a “retroactive exemption”. $800.00 should not have been spent for a set of unusable form bylaws designed for a large organization inappropriate for a small flying club. Perfectly good bylaws were available free online at the BAPA, WOR and MCHGA WEB sites.

A large amount of the Club’s money has been wasted. But for the cost of a new clubhouse roof a number of years ago, the $800.00 spent on the bylaws may have been the largest expenditure in Club history. The failure to pay taxes and the gamble on a “retroactive exemption” has placed an even larger amount of the Club’s depleted treasury at risk.

Under these circumstances it is now time that the person responsible for these losses consider reimbursing the Club for the financial damages he has caused.

dear dan brown;

It seems that rather than talk man to man, you prefer to make postings on the internet. It is a real shame that you have not taken me up on my repeated offers to talk in real time, either in person or on the phone. In fact, we both saw each other at the Fort yesterday, yet you chose to distribute copies of your post behind my back and never brought your concerns to me, let alone give me a copy. I find this to be very revealing of your character. I am also worried that it might harm your reputation as an attorney.

I quote the Merriam Webster online dictionary: “ Lie (noun) 1 a: an assertion of something known or believed by the speaker to be untrue with intent to deceive b: an untrue or inaccurate statement that may or may not be believed true by the speaker2: something that misleads or deceives”

For one quick example of how your post might harm your reputation please refer to your comparison of the cost of our attorney fees to other club expenditures. The club actually spent more than $800.00 on Dan Murphy’s Memorial BBQ. You might not know of this fact so your statement would only be a lie in definition “1b”. Of greater concern is that you are aware that the GGNRA paid for the roof, and yet you state that roofing was a club expenditure. That would be a lie in definition “1a”

To be very clear, I am not saying that you told a lie, or tell lies, and I am certainly not saying that you a liar. I am simply pointing out how your statements can be defined by Webster’s Dictionary and how they might tarnish your reputation. I’m really trying to help you.

Your post includes many statements that can be defined as lies:

- The $800.00 allocation voted on and approved by the membership was NOT for bylaws, it was for the non-profit applications.

- “Steve” alone did not recommend incorporation, or going non-profit by himself as you suggest. The four to five year process was overseen by all the Executive Committee’s who served during that period, and, with the knowledge and support of the membership.

- The club HAS prepared an annual statement.

- It will NOT be at least two years after incorporation before we are able to request non-profit status. We have already filed the applications as well as the retroactive exemption request.

- The treasury is NOT depleted, it is healthy and on budget.

- And as stated previously, the club did NOT spend money on the roof, it was paid for by the GGNRA

I’m just pointing this out as a friend so you don’t get yourself in trouble somehow. I know the California Bar Association’s rules of conduct are intended to apply to a professional relationship, but I would hope you would want to abide by their code of ethics even when giving your legal advice to the Fellow Feathers.

Warm regards,
Steve

So much for a calm rational discourse leading to a reasoned resolution of the issues.

1. There have been two roof repairs. The last mistakenly done by the GGNRA. The first done by the Club. Several years ago Steve called me asking about the first repair. I recommended he contact Mike Carlyle suggesting he may have more details or could recommend someone whom Steve could contact. Mike said Steve called him and they discussed the repair.

2. As to the $800.00, I wrote that but for the roof it “may have been the largest expense”.

3. There has been no annual statement for 2008, the first full year of incorporation.

4. The non-profit application requires bylaws be attached. It wasn’t until the May meeting that the bylaws were presented to the Club for a vote.

5. The online minutes of the 3.09 meeting posted by Steve state: “SR is still working on Fed and CA non profit applications but needs legal advice. Request for an $800- retainer, motion made, voted and passed.” The Club was incorporated 6.07. The bylaws were provided by the attorney.

6. Our neighboring flying clubs did not need $800.00 in “legal advice”.

7. The purchased bylaws were unusable depriving the members of the right to make the rules, regulations, set fees or even decide who could join the Club.

To paraphrase Shakespeare as to Steve’s anger, hostility and personal attacks: “Me thinks he doth protest too much.”

dan,
It seems that you think I “protest too much” so I ask you, exactly how much should a person protest who has had false allegations made against him by a person telling lies?

Rather than quote poetry, let me quote something a bit more relevant, the CALIFORNIA RULES OF PROFESSIONAL CONDUCT
, downloaded from the web site of the California Bar Association, of which you are a member. They state;

Rule 3-110 Failing to Act Competently
(A) A member shall not intentionally, recklessly, or
repeatedly fail to perform legal services with
competence.
(B) For purposes of this rule, "competence" in any
legal service shall mean to apply the 1) diligence, 2)
learning and skill, and 3) mental, emotional, and
physical ability reasonably necessary

I charge that by making assumptions and accusations without first verifying your information, you are acting recklessly and without diligence and are therefore in violation of the California Rules of Professional Conduct.

You have, and continue to make false and misleading statements that could have been prevented if you had taken the time to talk to me. I’ve pointed this out numerous times and yet you still make false statements. This is either incompetence or willful malicious intent. Which is it?

Twice now you have said that there is no annual statement for 2008 and yet I have all the 2008 financial statements that were presented at a club meetings by our Treasurer.

The bylaws were included with the application and have in fact been mailed. I have the postal receipt to prove it.

The club money was spent on the non-profit application and other issues, not the bylaws as you claim, and I have proof of that as well.

Please refer to my previous post as to your other false statements.

I request that you live up to the Cal Bar code of ethics and retract your false statements and apologize to me for the derogatory and false accusations that you have made.

This is a description of the non-profit incorporation process and a chronology as far as I understand it of Fellow Feathers’ attempt to incorporate as a non-profit and to adopt new bylaws.

A corporation is a legal fiction providing its officers and members with limited liability from lawsuits preventing their personal assets from being taken to satisfy corporate debts. There are two basic types of corporations, for-profit and non-profit. A for-profit pays tax. A non-profit does not pay tax. The California minimum tax for a for-profit is $800.00 per year. Federal tax is dependent upon the corporation’s income.

There are several types of non-profit corporations. The most common are 501(c) (3) and 501(c)(7). 501(c)(3) usually are charitable, religious or educational and organized to benefit the general public. The Red Cross is a 501(c)(3). Contributions to a 501(c)(3) are tax deductible. 501(c)(7) are social and recreational clubs organized to benefit their members. Contributions to them are not tax deductible.
Corporations are chartered by the states. To incorporate as a non-profit in California, the organization mails its Articles of Incorporation together with its application for non-profit status to the California Secretary of State. The application for a federal tax exemption is sent to the I.R.S.

The two applications are similar and available online with instructions. Nolo press in Berkeley has a book for non-lawyers titled: “How to Form a Nonprofit Corporation in California” for $32.99. It includes a CD with forms.

ATTEMPT TO INCORPORATE AS NON-PROFIT AND BYLAWS

Unknown date before 6.18.07
Articles of Incorporation but apparently not application for
non-profit status mailed to CA Secretary of State for filing.

6.18.07
Fellow Feathers’ Incorporated as a for-profit.

3.10.09
Club meeting. Steve notifies Club he is unable to complete
applications for non-profit status. He requests and obtains $800.00
from Club to hire an attorney to assist him. Steve’s minutes for the
meeting state: “SR is still working on Fed and CA non profit
applications but needs legal advice. Request for an $800- retainer,
motion made, voted and passed.”
(The Marin County Hang Gliding Association (MCHGA) obtained non-
profit status without legal assistance.)

4.17.09
Steve posts notice on WEB site that Club requires new bylaws for non-
profit status. “The Fellow Feathers needs to adopt new bylaws
specifically designed for a non-profit corporation. An attorney who
specializes in non-profit law has provided a set of standard corporate
bylaws for our use.”

4.26.09
Dan Brown posts objections to proposed bylaws. The “standard” bylaws are boilerplate forms 32 pages long designed for a large organization inappropriate for a small flying club transferring to the officer/directors the right to make the rules, regulations, set fees and even decide who can join the club.

4.26.09
Steve posts response stating that the Club’s existing bylaws, the old bylaws, cannot be used for a non-profit corporation. “The old bylaws lack fundamental articles required for a non-profit corporation and must be changed or replaced.” “He [the attorney] and I have worked hand in hand to create a set of bylaws that work for the Fellow Feathers Inc.” “On the contrary, your old bylaws [the existing bylaws] are inappropriate for a non-profit corporation.”

5.3.09
Dan posts new bylaws prepared by him based on MCHGA
and Fellow Feathers’ old bylaws.

5.3.09
Steve posts criticism of Dan’s new bylaws and the MCHGA bylaws.
“You have based your new bylaws on the old FF bylaws and the MCHGA bylaws. That in itself is what is wrong with them! You should note that both sets of bylaws were written many years ago and without regard to incorporation or modern law. Neither set is appropriate to our current needs.”

5.12.09
Club meeting. The Club rejects Steve’s bylaws. Supports subject to
minor modifications bylaws prepared by Dan. To go into
effect bylaws must be approved at two consecutive meetings.

5.21.09
CPA advises Dan that since it has been almost two years since the Club incorporated as a for-profit, the Club is subject to about $1,900.00 in taxes plus penalties and fines. The Club has never filed a tax return.

5.25.09
Steve posts that the he has filed for “retroactive exemptions.” Presumably this means that applications have been filed with the Franchise Tax Board and the IRS requesting that non-profit status be granted and backdated to the date of incorporation, 6.18.07.

5.26.09
Steve posts additional information about the application. “The bylaws were included with the application and have in fact been mailed. I have the postal receipt to prove it.”
The only bylaws the Club has are the “old” bylaws that Steve wrote needed to be “changed or replaced” because they “lack fundamental articles required for a non-profit corporation” and are “inappropriate for a non-profit corporation.”

5.27.09
Steve posts that Dan makes “false and misleading statements either [through] incompetence or willfully malicious intent … in violation of the California Rules of Professional Conduct.”

The Club meeting is June 9, 2009.

Dan, the incorporation started long before Steve was President, so please stop villifying him.

http://flyfunston.org/bbs/viewtopic ... orporation

The entire board talked about this and posted both discussions and votes on this bulletin board for all to see. Please read through http://flyfunston.org/bbs/viewforum.php.html?f=2 for a more complete history than what either of us have to remember.

Brian was the first to be responsible for and file incorporation papers. He can give you more details but, at the time, filing for CA tax-exempt status was a known quantity. It was always intended for us, as CA law requires, to file the corporation then, within something like 2 years (I don't have the dates in front of me) to file for the state and federal tax exempt status. Your accountant is making mistaken conclusions based on incomplete information having been provided.

Filing annual tax reports as a non-profit, 501(c)(7) of our size and income is something like a 10 minute affair. It's a non-issue.

I wrote "the entire Board" in the previous message. Yes, the board talked about it, but it was openly discussed in many, many meetings in conjunction with any members that attended.

More info: we used the 2004 and 2005 year end statements to file the initial articles of incorporation. The statements were provided by Attila, the Treasurer at the time, to Brian: http://flyfunston.org/bbs/viewtopic.php.html?t=415 (Dec 12, 2006).

By this time we'd already been discussing and planning for the better part of a year.

dan,

Again I quote the Merriam Webster online dictionary:

“ Lie (noun) 1 a: an assertion of something known or believed by the speaker to be untrue with intent to deceive
b: an untrue or inaccurate statement that may or may not be believed true by the speaker
2: something that misleads or deceives”

By definition, you dan brown, are printing lies and it is impossible to have a valid debate with a liar.

One lie from your post on June 4, 2009: “6.18.07 Fellow Feathers’ Incorporated as a for-profit.”

The truth: On June 18, 2007, the Fellow Feathers Incorporated as A California Nonprofit Mutual Benefit Corporation. This is a glaring indication you either lack the most basic understanding of the facts or are intentionally attempting to mislead the membership.

I could go on to disprove the rest of your false statements but having done that in the past with no remorse from you, I see no point at this time.

You have made many lies and misleading statements in an attempt to discredit me and the bylaws that were written by an attorney who has a great deal more understanding of non-profit corporate law than you do.

I have more evidence of your incompetence that I will present at the meeting. I urge everyone who has any interest in our club to attend the meeting and hear it for themselves.

I still claim that you are in violation of the CALIFORNIA RULES OF PROFESSIONAL CONDUCT , downloaded from the web site of the California Bar Association, of which you are a member. The rules state, in part;

Rule 3-110 Failing to Act Competently
(A) A member shall not intentionally, recklessly, or
repeatedly fail to perform legal services with
competence.
(B) For purposes of this rule, "competence" in any
legal service shall mean to apply the 1) diligence, 2)
learning and skill, and 3) mental, emotional, and
physical ability reasonably necessary


You have lied and continue to lie to the membership, have provided documents that do not conform to state law, and given legal advice that would put the club in financial jeopardy.
As President it is my job to protect the club from such blatant incompetence and therefore I am recommending that the membership vote against your proposed bylaws.