Incorporation

Started by RobertB8 • 4 replies • 1239 views

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RobertB8 (California)
Posts: 4

Posted:

We are just starting a new 4 unit hoa and we have received very little guidance. The property was subdivided so there was no pre-existing organization. The developer was a private party and has provided bylaws, cc&r's and a a preliminary budget. I have applied for a TIN but am unsure about whether I need to submit an application to form a coporation or whether the hoa can be organized as an unincoporated association as is stated on the last page of the bylaws. I am getting mixed responses. Any help would be appreciated. Thanks.

RogerB (Colorado)
Posts: 5,067

Posted:

Robert, do you have common areas? If not, why did the 4 units need to formed into a common interest ownership? What is a "TIN"?
To answer your question - no you do not need to incorporate. But the more important question is should you? Do you need to be classified as a not-for-profit association? Do you need the protection provided by a corporate shield? Those two items can be reasons to incorporate.

RobertB8 (California)
Posts: 4

Posted:

Good Morning Roger, thanks for the response. The 4 units share a common courtyard area and the water bill, garbage etc. are not split up. The TIN is the Tax ID Number. I applied for and received this over the phone with the IRS. With the current other homeowners there has already been quite a bit of conflict so the liability limiting benefits of a corp would I think be welcomed by all the residents. I'm just wondering whether it's practical cost-wise for such a small organization. Thanks very much.

DaneC (California)
Posts: 210

Posted:

An unincorporated association may be created by a constitution, articles of association, or bylaws which contain the required language to meet the organizational requirement. The following format is acceptable.
1. The name of the organization.
2. A statement indicating that the organization is organized for nonprofit purposes and that the individual members will not derive profit from the organization. An appropriate clause is:“This organization does not contemplate financial gain or profit to its members and is organized for nonprofit purposes.”
3. The specific and primary purpose of the organization. An appropriate clause is:“The specific and primary purpose of theassociation is to operate a homeowners’association within the meaning of .....State code.
4. A limitation clause. An appropriate clause is:“Notwithstanding any of the above statements ofpurposes and powers, this organization shall not, except to an insubstantial degree, engage in any activities or exercise any powers that are not in furtherance of the specific purpose of this organization.
You can amend an existing document to include these provisions or you can adopt a new document. In either case, each member of the board of directors must sign the new instrument or amendments.

You should have it recorded with the County Registrar, where your bylaws and CC&R's were recorded. You can check with your insurance agent for the types of insurance that you will need - there is one who is a sponsor on this forum.

NancyD1 (Florida)
Posts: 447

Posted:

Before you file any organizational papers I would suggest that you consult with a qualified CPA or tax attorney. For such a small organization there are many options legally and financially.

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