Whether you are starting a housing corporation from scratch, reorganizing an active but dormant housing corporation, or assisting a housing corporation whose corporate status has been revoked, this article will give you assistance to get the housing corporation up and running again. We recommend every chapter has an incorporated housing corporation - regardless of if you are just starting a chapter, have been around for 30 years, are off-campus, or on-campus.
Housing corporations are not always responsible for everything listed above. If the fraternity house is on-campus, the university will typically handle a lot of physical responsibility of the house. If the fraternity does not have a house, the housing corporation should be an advisory board to the undergraduate chapter and plan to raise funds, purchase, or lease a chapter house. Due to the nature of the undergraduate chapter (members revolve every 4 years), having a housing corporation that remains mostly the same can pave the way to a chapter obtaining a fraternity house.
Housing corporations should be incorporated as a non-profit corporation, following the laws of the state or province in which the chapter is located. While incorporating does involve filing with the state, legal fees, and application fees, these disadvantages are negligible to the advantages a housing corporation provides.
In order to reform a dormant housing corporation, you should first find out the status of the corporation. The best way to find the status is by utilizing your Secretary of State resources. For example, in Texas you can use the Taxable Entity Search. By doing this, you can determine whether the corporation exists or was ever chartered, is still recognized by the state, and if a copy of the original charter is on file. If the housing corporation exists, you need to obtain and update the original articles of incorporation and bylaws.
If you are mailing in a physical request, be sure to include the exact name of the house corporation, the current or previous addresses of chapter houses, and approximate date of incorporation. You may need to search real estate records, call headquarters, or speak with alumni to find this information if not readily available.
Incorporating a new housing corporation involves a few practical considerations, such as choosing the corporation’s name, principal address, original trustees and officers, and determining who will serve as the incorporators. There are a few considerations that will require legal assistance, such as the structure of the corporation, the rights and powers and members and trustees, preparing and filing the incorporation documents, and filing the appropriate documents with the Internal Revenue Service (IRS). It is important to remember that filing the incorporation is done within the state or province in which it is located, and the IRS filing is a separate federal filing.
The Articles of Incorporation are a legal foundation for the housing corporation’s existence. The bylaws handle the more specific details of the internal workings.
It should be noted that the purpose section should be described to meet tax-exempt status, as discussed later in this article.
The bylaws should specifically detail the internal workings of the corporation.
Running a housing corporation is like running a business. Be sure to adhere to your bylaws, host regular meetings, elect trustees and officers, and maintain records and minutes.
Most states require filing an annual report in order to maintain their status. In Texas, you must file an annual report and franchise tax return with the state tax commission each year by July 1st.
If the housing corporation owns property, it must pay property taxes and insurance. Employees such as a house director, cooking staff, or janitorial staff require paying taxes and insurance. The corporation also may be responsible for paying worker’s compensation and unemployment compensation. Be sure to identify what is required of your corporation early so you are not blindsided by legal repercussions.
The housing corporation should have someone familiar with accounting and legal experience (specifically in corporate and tax issues) to assist in these areas. Depending on the size of your alumni base, it would be helpful to have alumni on the board who are knowledgeable in these areas.
Failing to have proper legal and accounting representatives can only hurt the organization moving forward. Be sure to carefully select people who can help appropriately.
Housing corporations should be incorporated as non-profit. Housing corporations should not be distributing their profits to shareholders through dividends and should not be organized to make profits for their members.
A non-profit corporation is made up of “members”, as opposed to shareholders in a for-profit corporation. The members elect a board of trustees or a board of directors which set policies and make decisions that affect the entire organization. The board of trustees or directors may be elected annually by the organization’s members. Each state’s corporation laws differ, but generally require a president, treasurer, and secretary. Be sure to research the laws in your state.
As mentioned previously, a corporation protects the members from most liabilities that come from the housing corporation’s activities. In an unincorporated association, the members could be directly liable for debts or legal responsibilities.
Because the corporation requires certain officers and a board of trustees or directors, this may decrease the housing corporation’s operating flexibility. It also may increase the operating costs of the corporation. In order to maintain corporate status, a non-profit corporation must follow certain formalities in organization and record keeping. Certain administrative filings with the Secretary of State, such as payment of franchise fees and taxes, are also required.
Formed under the state’s specific statutes for not-for-profits usually exempt the corporation from certain state and local taxes, such as corporate income taxes. It’s recommended to meet with a tax advisor to understand the regulations in your state. Note this does not exempt the housing corporation from federal tax
In order to become tax exempt on the federal level, the housing corporation must adhere to the IRS standards. Remember, being a tax-exempt organization is not the same as being a charitable organization.
Generally, a housing corporation will seek tax-exempt status under the 501c7 section of the IRS. There are requirements to maintain this status.
The articles of incorporation purpose should clearly state that its main goals align with Section 501(c)(7), focusing on specific activities like owning property, earning income (like rent), and using this income, minus expenses, for activities that match tax-exempt rules. It's important to remember that getting a favorable nod from the IRS for tax-exempt status is just the start; the corporation must consistently operate within these rules to maintain this status.
Your articles of incorporation should mention that no part of its net earnings can benefit individuals with a personal interest in the corporation. This holds true even if the earnings aren't distributed, as benefits could still be indirectly provided through lower dues or enhanced services without increasing member costs. Furthermore, to maintain its tax-exempt status, the corporation must ensure that its charter, by-laws, or any policy statements do not contain any provisions that allow for discrimination against individuals based on race, color, or religion.
In order to obtain federal tax-exempt status, complete and submit IRS Form 1024, Application for Recognition of Exemption Under Section 501(a). This form requires detailed information about the organization, including its purpose, activities, and financial data. Along with Form 1024, include the articles of incorporation, bylaws, and a detailed description of the organization’s activities.
Once the form is submitted, you must wait for review from the IRS. You will then receive a determination letter, stating the status of your exemption. If you receive federal tax exemption, it is imperative to maintain this status by adhering to IRS regulations such as Form 990.
An employer identification number is an ID that represents your housing corporation for tax purposes. An EIN is useful for opening a bank account, for example.
To apply for an Employer Identification Number (EIN), the housing corporation should submit Form SS-4 with the IRS. You can also apply for an Employer Identification Number (EIN) online.
Congratulations! Now that your housing corporation is up and running, sign up with MyGreek to see how we can help your chapter members pay rent, organize rooms and agreements, and more!
