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EAA’s Flying Club Manual

Establishinga Non-ProfitFlying Club

®

Copyright ©2014 Experimental Aircraft Association, Inc. (EAA)All rights reserved.

Information contained in this booklet is provided “as is” and without any representations or warranties by the authors or publisher. The authors and publisher disclaim any and all liability incurred in connection with the use of this information or specific details related to the information contained in this booklet.

With the exception of quoting brief passages for the purposes of review, no part of this publication may be reproduced without the prior written permission from the publisher, Experimental Aircraft Association, Inc.

Information contained in this booklet is not provided as legal, tax or accounting advice. Please consult competent legal, tax and accounting advisors before implementing any information contained in this booklet.

Table of ContentsChapter 1: Getting Started

Chapter 2: Organizing a Flying Club

Chapter 3: Creating a Budget

Chapter 4: The Heart of the Matter: Non-Profits and the IRS

Chapter 5: Operational Rules

Chapter 6: Acquiring an Aircraft

Chapter 7: Financing an Aircraft

Chapter 8: Insuring Your Club

Chapter 9: Limiting Liability

Chapter 10: Marketing and Promoting your Club

Chapter 11: Winding a Club Down

EAA’s Flying Club Manual | 1

Chapter 1: Getting Started

Welcome to EAA’s Flying Club Manual!

This Manual was created to assist EAA members in organizing an independent, non-profit flying club. The main purposes of a flying club are to reduce the cost of flying for all members and to in-crease and extend an individual’s flying activity.

EAA’s vision of a non-profit club is one in which all members volunteer their time and services so that everyone in the club has more opportunities to fly at less cost than they can achieve through any other means.

Getting started in aviation can be challenging. It takes a commitment of time and resources, including money, to learn to fly and to continue flying. Frequently, the costs of learning to fly and owning an aircraft are cited as the reasons why someone chooses not to follow their aviation dreams. In reality, the true reason may be a combination of many factors. Joining a flying club can reduce those barriers and provide a community of support to help motivate one to achieve their dream.

In addition to this Manual, numerous other helpful sources are available, including FAA Advi-sory Circular (AC) 00-25, “Forming and Operating a Flying Club,” AOPA’s Guide to Starting a Flying Club, the websites of well-established flying clubs such as the Stick and Rudder Flying Club (est. 1948) of Waukegan, Illinois (www.srudder.com), the Wings of Carolina Flying Club (est. 1961) of Sanford, Carolina (www.wingsofcarolina.org), the website www.StartAFlyingClub.com, and many more. Search online and you’ll find innumerable resources that will provide a variety of informa-tion and guidelines.

Why Should You Start a Flying Club?In 2012, AOPA surveyed 800 random pilots; 56 percent of the responding pilots had been a

member of a flying club at one time, with 22 percent still currently active in such a club. Ninety-six percent of those pilots rated a flying club membership as a valuable experience. That survey enu-merated the following major reasons why a flying club is a good experience:

• Less expensive than owning an aircraft individually—56 percent• Access to a variety of aircraft—29 percent• Defrayed cost and shared responsibilities—21 percent

2 | Establishing a Non-Profit

• Pilot camaraderie—21 percent• Shared knowledge with other pilots/instructors—17 percentThirty-eight percent of the pilots surveyed indicated that they were more likely to learn more and

become a better pilot by being a part of a flying club. Recreational fliers had the highest club partici-pation.

Some benefits of a well-managed flying club include: • High instructor standards; • Good value for the membership fee;• Ongoing safety education programs; • Online scheduling; • Quality aircraft management; • Larger selection of aircraft to fly; • Good governance and risk management.But don’t make the mistake of only thinking of a flying club as one with an older airplane solely

aimed at keeping flying at its lowest price. While that can be a valid model, a flying club can also provide members with the opportunity to build and then fly a kit plane. It could be the path to fly-ing an affordable warbird, an aerobatic competition airplane, or a traveling machine such as a Cirrus SR22 or any other such similar machine. Don’t limit your vision. Let a flying club be your path to whatever your aviation dream is! Find people with similar dreams and work together.

Other benefits of a flying club include:• An expensive asset gets used more often. Aircraft are expensive, and operating them isn’t

cheap, but the good thing is they hold their value. Like most mechanical devices, the more they’re used the better it is for the equipment. In a flying club, the aircraft will be flown more often and that’s good. For example, there’s less chance of engine corrosion if the aircraft is flown more fre-quently.

• You can update the aircraft more often, which means you get to fly a more modernly equipped aircraft. If you are the single owner of an aircraft, updating avionics, interiors, or whatever else you desire can be an expensive proposition. If 10, 20, or more club members share the aircraft, the group shares that cost.

• You’re able to maintain the aircraft at a higher level of maintenance. As you establish your club, you establish the maintenance standards. When there’s more than one person contributing to the maintenance costs, you can set that bar higher.

• You know the level of maintenance of the aircraft. Unlike renting an aircraft from a fixed-base operator where you have no idea of the maintenance philosophy, as a member of a flying club you know the standards under which the aircraft is operated…and you know the other pilots who are flying the aircraft and know whether you can trust their judgment about reporting mainte-nance issues.


• There can be strong mentoring relationships. Being a part of a flying club is a great way to learn about aircraft ownership for the first time. You can learn about preventive maintenance under the watchful eye of other pilots and mechanics.

• There’s a great social aspect to a flying club that provides camaraderie and learning experi-ences. A flying club provides the opportunity to fly with a variety of pilots into a variety of airports, which can be another mentoring experience. And, of course, there is the opportunity to connect with a local EAA chapter to add more social interactions.

Anna Osborn, now of Kerrville, Texas, reflected on her experience as a long-time member of Waukegan’s Stick and Rudder Flying Club. “While I had earned my pilot certificate before joining, being a part of the club made a big difference in my life. It kept me flying, made me a better pilot, and gave me many special friends I would not have known otherwise…. The companionship, the encouragement, the experience of flying on trips with other members, and the learning environ-ment was so important. The feeling of ownership kept all members careful about obeying rules and caring for our aircraft and our facilities.”

Charlie Becker, EAA’s director of communities, feels flying clubs continue the social aspect of learning to fly. “I look back at my own experience of learning to fly; it was this intense experience of learning and working with an instructor. Then, once I earned my certificate, that social interac-tion just evaporated. If I had been a member of flying club or could have joined one at that point, it would have been a better experience.”

Why Is EAA Providing this Manual Now?EAA has long believed that flying clubs are a great way to make aviation more accessible and af-

fordable. Over the years, many members have approached EAA asking for information about estab-lishing a flying club. EAA wanted to help by providing guidance for our members that addresses the unique requirements of EAA members. Therefore, this EAA Manual includes information specific to our membership, such as the special requirements surrounding using experimental amateur-built (E-AB) aircraft in flying clubs and how to build an aircraft as a flying club while working with mem-bers of a chapter. This guidance can only come from EAA.

EAA members represent a vibrant and growing segment of aviation. Flying clubs can be an easy and affordable way to share your passion and interest in aviation, and they are a fantastic way to develop a community at your local airport. Please consider this Manual to only be the start to the assistance EAA can offer. Contact EAA’s Member Services staff to talk to our flying club experts for more specific information to help you along the way.


Lifecycle of a ClubLike any organization, a flying club will go through several life phases—from start up to a fully

functioning club to a club that may someday wind down and no longer exist. As you organize your club, you’ll need to plan for all those phases. Be certain a flying club format is the best organization-al method for your group by getting legal and accounting advice as well as by consulting with mem-bers of other flying clubs. For example, depending on the number of members involved, your group might function better—i.e., get better insurance and loan rates—by operating as a partnership.

How do you get started? The first step is to find like-minded people and begin the conversation. Share your dreams and goals: Is your goal inexpensive flight or is there a particular airplane you’d like to be able to fly? Will your club embrace flight training? Do you envision the club owning one aircraft or more than one? Where will your club be based? Establish your club’s mission.

Next, follow the directions in Chapter 2 “Organizing a Flying Club.” Because insurance will be one of the major expenses of the club, connect with an insurance agent who can help you make a wise decision in the choice of your club aircraft. The EAA Aircraft Insurance Plan (www.eaa.org/en/eaa/eaa-membership/eaa-aircraft-insurance-plans) has several agents who are very knowledgeable about the ins and outs of flying clubs.

During the operational phase of the club, make sure you remain compliant with local, state, and federal rules. This is known as “regulatory compliance” and “proper governance.” Your airport and its governing body—e.g., the municipality, county, or the state where the club is based—and the FAA and IRS all have their particular requirements. This guide offers direction for such compliance and governance, but each case is unique, so be sure to gather good advice if even the slightest question arises.

Wind-down can involve some technicalities which are also addressed in this guide. Once again, competent legal, tax and accounting advice will make life a lot easier.


Chapter 2: Organizing a Flying Club

This section has been developed for those clubs anticipating formation and operation as a non-profit 501(c)(7) social and recreational club. Throughout this Manual, the term “non-profit” is used interchangeably with “nonprofit,” “not-for-profit,” and “non-stock.”

It is highly recommended that you seek the advice of an attorney and/or CPA when starting a flying club. While there will be a cost involved, knowledgeable advisors will guide you through the complex and not so complex procedures. If you do seek this counsel, you will be asked to sign IRS Form 2848 Power of Attorney and Declaration of Representative. (See Appendix.) This form allows the attorney or CPA to speak with IRS on your behalf should questions arise during the tax-exempt application process.

Membership StructureOnce you’ve had a first few informal meetings with potential start-up members, gathered some

basic information on aircraft selection, acquisition, and financing, and developed a rough outline of your plans going forward, you will be ready to embark on the first formal steps toward actually orga-nizing your flying club. At this point, your meetings should take on a more structured feel. Be sure to take careful notes (minutes) of all discussions held during these first organizational gatherings and keep copies for future reference.

Assuming you already have a group of individuals ready to commit to establishing a club, your first formal step will be to select members to fill roles as directors and/or officers of the club. You will also need to select a Registered Agent and Registered Address for your state incorporation pa-perwork. (More on this later.)

When structuring your club leadership, keep in mind if you are a small club with only a few mem-bers, more than likely each member will have some official role as an officer or director or both. If you are a larger club, perhaps 10 members or more, some members may not want to assume any leadership roles.

When starting up, the club should establish an initial Board of Directors to manage club business. That minimum should be a president, secretary, and treasurer.


If you are starting a club and you can identify at least 6 initial members, you should consider the following officer positions:

PresidentVice PresidentSecretaryTreasurerSafety OfficerMaintenance OfficerScheduling OfficerSafety, Maintenance, and Scheduling Officers may also hold the titles “Vice President of Safety”

or “Vice President of Scheduling” etc. It is permissible to have more than one vice president.While not required by any law or regulation, the individuals assigned to and accepting these posi-

tions should have abilities that fit the job. For example, your treasurer ideally might be a member with bookkeeping or accounting experience, and the president might be a person who has held past leadership roles and is comfortable directing an organization.

While it may seem a bit of overkill to have safety, maintenance, and scheduling officers for a small club, assigning a position to each member of a small organization gives those members the chance to contribute their personal skills and knowledge for the betterment of the group. It can also enhance the camaraderie and social aspect of the club. Larger clubs (10 or more members) should absolutely establish these positions and identify the best prospects for the jobs. This will help limit club liability and may even help reduce annual insurance costs.

What’s the difference between officers and directors? Officers are individuals with specific titles and duties. They manage the day-to-day affairs of the organization and are generally appointed by the membership of Board of Directors and serve at its direction. Directors are members of the Board of Directors and are generally voted in by the membership of an organization. They oversee the actions of the officers, but in many small organizations, the members of the Board of Directors may also be its officers.

Generally speaking, establishing and filling only officer roles for a non-profit flying club may be enough to satisfy the statutes of some states. It certainly fulfills the IRS requirements for tax-exempt status. However, be aware that some states do require non-profit organizations to have a Board of Directors in addition to Officers. If that’s the case for your state (consult a knowledgeable attorney on this), your leadership members may be able to hold both officer and director roles si-multaneously. In either case, you will need to address this when drafting your bylaws so a proper organizational structure is established and followed. We will see later that this is a key part of limit-ing personal liability for members.

At your first organizational meeting or soon after, and after the “start-up” members have identi-fied and selected the cadre of initial officers and/or directors, that “start-up” group of members should have a formal vote appointing the cadre to their respective new leadership positions.


Equity Versus Non-Equity ClubsWhen forming a flying club, one of the fundamental decisions you have to make is regarding air-

craft ownership structure, i.e., will this be an “equity” or “non-equity” club? In a traditional, for-profit equity club, each member owns a financial stake in the club equal to their ownership. For example, you might set up a for-profit flying club as a corporation with 10 shares of stock and each member of the club purchases a share of stock. Therefore, all 10 members own 10 percent of the entity. When a member wants to leave the flying club, they would be required to sell their share of stock to a new member.

In a traditional for-profit, non-equity club, members do not own part of the club and there is no is-suance of stock. Participants of non-equity clubs are simply members, not owners. The corporation itself may own the aircraft, or the aircraft may be leased from a separate individual or entity.

There are advantages and disadvantages to either approach. This guide is primarily written as-suming the non-equity approach because non-profit corporations do not issue stock or shares as for-profit corporations do. Additionally, in the non-profit format, highly technical issues such as “pri-vate inurement” and “excess benefit transactions” can occur in the “equity” approach if not prop-erly addressed by a competent tax advisor at start-up. This is not meant to scare anyone away from starting a non-profit club, it’s simply meant to let you know it’s best to seek good advice right from the beginning, and this guide is a helpful place to start.

Establishing the Formal Club Structure…aka the Governing Documents

At this point the initial club members have met and discussed financing and potential aircraft choices, held a formal organizational meeting (or meetings), and selected the initial group of officers and/or directors and made some basic organizational decisions. Now it’s time for the very first of-ficial paperwork steps: Incorporation (or Organization).

What’s the difference between Incorporation and Organization? For non-profits, some states use the term “Incorporation” when the non-profit files its initial start-up paperwork. Other states use the term “Organization.” Basically it’s the same thing, it just depends on which term your state uses. You also may run into the term “Charter.” Some states use this term in place of “Articles of Incorporation.”

As a non-profit flying club that will eventually apply to the IRS for tax-exempt status, you should incorporate (or organize) under your particular state’s non-profit corporation laws. Incorporation (or organization) as a “corporation” is suggested for flying clubs for a variety of reasons. Incorporation


can help limit personal liability exposure for members; the basic set up is not necessarily difficult or costly in most states; and the IRS tax-exempt application process is a bit more streamlined for cor-porations rather than limited liability companies (LLCs) or “unincorporated associations.”

While many states (and the IRS) do permit non-profits to be operated as LLCs, operating a non-profit as an LLC can be a minefield of complexity, and many times state and federal tax regula-tions for non-profits don’t mesh well. However, there are widely varying opinions on the use of the corporate format versus the LLC format for non-profits. In some situations and in some states, an LLC may be the perfect fit; in others, it wouldn’t work at all. It mostly depends on your particular situation, the size of the club, your airport’s requirements, and your state’s non-profit requirements. Again, here is where competent legal, tax and accounting advice can be invaluable.

Additionally, while the IRS also allows “unincorporated associations” to apply for tax-exempt status, the “unincorporated association” format (which is really just a group of individuals with no formal club structure) provides no liability protection for individual members and is therefore a poor choice for a flying club.

What is the difference between a “non-profit,” “not-for-profit,” and “non stock” corporation? These terms are state-specific. In other words, each state has its own descriptive term for a corpo-ration or organization that operates without a profit motive. For example, Colorado uses the term non-profit, Wisconsin uses the term non-stock, and New York uses the term not-for-profit. The tech-nically appropriate term all depends on the individual state.

Assuming you will go forward as a non-profit corporation that will eventually apply for federal tax-exempt recognition, how do you start the state incorporation (or organization) process?

Today’s Internet world makes it easy! Simply go online and locate your state’s Secretary (or De-partment) of State website. Search for Non-Profit or even more simply, Google your state and the word “nonprofit” or “non-profit” (Examples: “Iowa Nonprofit filings” or “New York nonprofit incor-poration,” or “Georgia nonprofit organizations Secretary of State”). You will be directed to the par-ticular state’s governmental office that handles non-profit formations and registrations. You will be provided with detailed instructions on completing and filing the non-profit corporation paperwork.

Can a non-profit flying club incorporate in a state other than where its main operations are located and conducted? Yes, but be prepared to answer questions should the club be audited by the state where most operations are conducted or where the club and/or its aircraft are located. Also, be pre-pared to keep extremely detailed records regarding your choice. Many for-profit organizations choose to incorporate in Delaware for certain favorable tax advantages, including sales tax advantages. However, non-profits, when they achieve tax-exempt status generally do not see any additional benefits to incor-porating in a state other than where they operate. This is a specialized area and if you are considering this route, you would be well advised to seek the counsel of a knowledgeable attorney and a CPA.

When it comes to actually filing incorporation paperwork, keep in mind that while most states have very simple procedures, others have a bit more complexity. Many states allow immediate online fil-


ing and acceptance of paperwork, but other states require original paperwork to be mailed or hand-carried to the state office for filing. All states post their incorporation guidelines and instructions on-line for public reference. However, if you find the state incorporation paperwork filing instructions too complex, call the state office listed and ask for assistance or seek the help of an attorney.

There will be a state filing fee for your incorporation paperwork, so keep this in mind for your budget. Also keep in mind there will be an annual state renewal fee for the organization.

WARNING! Filing incorporation paperwork as a non-profit organization with a state of-fice does not grant federal tax-exempt status to an organization! Federal tax-exempt status can only be granted by the Internal Revenue Service. Exemption from various state and local taxes can generally only be achieved after federal tax-exempt status is granted by the IRS.

Your initial incorporation paperwork will also require naming a registered agent and a registered address with the state of filing. If you choose to seek the assistance of an attorney for set-up, the attorney will generally agree to be named as the registered agent with the law office listed as the registered office, for a fee. However, if you wish to save funds, any club member can also be the reg-istered agent and that member’s address (as long as it’s a physical address and not a post office box) can be the registered address of the club. If the club has a physical location and address, that address may be used as the registered address. Registered agents and registered addresses are necessary so the organization has a place where official documents can be mailed, delivered or served.

What’s in a Name? The name that you select for your flying club can be very important for your members and for

EAA. As part of this project, EAA spent considerable time investigating how it could facilitate flying clubs. EAA initially considered allowing EAA chapters to be a home for flying clubs, but for many reasons this was not attractive. For one, the cost of insurance became prohibitive because the li-ability of every incident/accident would flow through to EAA proper. In our investigation, the cost of insurance would exceed $8,000 per aircraft, which would be prohibitive. And this cost only pro-tected EAA and would be in addition to any insurance cost to the flying club for its activity.

The chapter model was also believed to be unattractive because only a subset of the chapter membership likely would be interested in a flying club. If you are an aircraft owner, a chapter-based flying club would be of little interest to you because you already have access to an aircraft. After considering all the options, we decided to pursue the development of this resource guide for the creation of member-based flying clubs. This approach will support our members who may want to join together and form a flying club, while protecting chapters and EAA from unwanted liability.

The name you choose for your flying club is very important because it will establish the differen-tiation between EAA, an EAA chapter, and the flying club. Any flying club must be completely sepa-rate from EAA and from any EAA chapter. There can be no comingling of funds or legal entities. To


accomplish this no club may use the letters EAA or the words Experimental Aircraft Association in the name of their club. This is for the protection of your membership organization. EAA also asks that your flying club not include the name of your chapter. There can be no legal connection be-tween EAA or your EAA chapter and any flying club. However, EAA recognizes that flying clubs may result when members of an EAA chapter choose to join together and set up a separate flying club. That’s acceptable, assuming it is completely independent from any chapter and from EAA.

Properly organizing your flying club can protect yourselves, your chapter, and your membership organization from harm. This Manual will help you to create a flying club that will have lasting satis-faction for your members and create access to inexpensive, accessible flying for all.

Bylaws:After formally incorporating, your club is now “official” and should adopt bylaws. Bylaws govern

the actual operations of the organization, but are not required by the IRS for approval of tax-exempt status. However, as a practical matter, your club should draft and adopt bylaws so your operations and requirements are spelled out for your members. By adopting bylaws, members will have a guideline to follow, board members will have direction for decisions, and officers will have their du-ties outlined.

As a side note, insurance companies always request copies of your bylaws when reviewing poli-cy underwriting and issuing quotes.

While the IRS does not require the adoption of bylaws for tax-exempt organizations, be prepared to answer a lot of questions about your operations when applying to the IRS for tax-exempt status if you have not adopted bylaws.

Bottom line: You should draft and adopt bylaws. A generic, non-state specific sample is in the Ap-pendix.

Note: Bylaws are NOT the same as club aircraft operating rules. These are two completely different documents. Bylaws spell out how the club is run, aircraft operating rules spell out how the aircraft is used.

Acquiring Your Federal Tax ID NumberOfficially known as an EIN, Employer Identification Number, or TIN, Taxpayer Identification Num-

ber, your federal tax ID number has nothing to do with whether or not you have employees or ever plan to. This number is your business ID for IRS purposes. Banks require an EIN to open a checking account and so do most states for various filings after incorporation. You will also need an EIN for your IRS application for tax-exempt status.


Acquiring the EIN is a very simple task; it can be done online and it takes about 10 minutes. Go to www.irs.gov/businesses and follow the instructions. You will be directed to a Question & Answer format that requests basic information such as the type of organization, address, responsible per-son, etc. You can prepare your answers ahead of time by completing IRS Form SS-4 first (see Ap-pendix). That will shorten your time online. In the alternative, you can complete and sign the actual IRS Form SS-4, mail it to the appropriate IRS office, and wait for your EIN to arrive in the mail. The “mail-in” process takes about 2 to 4 weeks. The online process takes about 10 minutes.


Chapter 3: Creating a BudgetEvery organization needs a good accounting system to bill members, keep track of expenses,

file a tax return, and more. Your flying club members will expect that someone is watching over the group’s finances. Creating a budget will help your officers and directors determine what your club’s fee structure should be. Having a budget is as important as having the money to operate your club.

Initial FundingWhen you consider setting up a flying club, the first challenge you will face is how to get some

money into the club’s treasury. Because we are focusing on non-equity clubs, you likely will need to finance the club’s aircraft and any other start-up expenses using either a bank loan or a loan from club members. The loan can be paid off over time using the net profits from operating the club.

You will need to create a preliminary budget to determine what your club will need to charge your members on a monthly basis. It will help if you break your expenses down into fixed and variable expenses.

Fixed expenses are things like hangar rent and insurance; these expenses occur regularly wheth-er you use the aircraft or not. They may occur monthly or annually. Either way, you’ll need to make sure that you have the money to pay them regardless of how much time the aircraft has flown. Here’s a list of typical fixed expenses:

• Hangar rent• Aircraft insurance• Annual inspection• Annual registration fee• Flight scheduling software • Principal and interest payment on loan• Personal property taxes (if applicable)• Social activities• Reserve for the unknownVariable expenses include things such as fuel, oil, and an engine overhaul or replacement; these

expenses only occur when the aircraft is flown. You will need to charge an hourly rate sufficient to cover these types of expenses. Some decisions will need to be made regarding who will pay for fuel since it can fluctuate in price from month to month. Some clubs offer a “dry” rate that ex-cludes providing fuel, with the caveat that every pilot must fill the tanks after each flight.

A good practice to follow is to set up your monthly dues to cover your fixed expenses and your


hourly charges to cover variable expenses. This will ensure that you have the funds to pay for things like hangar rent and insurance even when the weather is bad and no one can fly the aircraft. Like-wise, your hourly charges should be enough to provide a fund to cover the costs of fuel, oil, and engine overhaul/replacement.

ReservesReserves are excess cash that come from a net profit that the club has acquired or through

member contributions such as initiation or joining fees. It is a good idea to establish reserves for known expenses that can be anticipated, such as an engine overhaul, by building that into your hourly rate. This will allow you to avoid a large charge to the membership to cover the expense. Just as a family needs a savings account for unexpected expenses, a flying club needs an emer-gency fund as well. A new member would be unhappy if they joined a club and then found out the aircraft needs a new engine and all members were expected to contribute equally.

Having initiation or joining fees is one way to establish an initial reserve fund to cover start up ex-penses.

As discussed in other chapters, finance and insurance companies want to see a professionally run club before they’ll consider writing a loan or issuing an insurance policy. Your club’s finances and how they are managed is one area on which they will focus. If necessary, consider professional help if no one in your club is an experienced accountant and can manage the club’s finances.


Chapter 4:The Heart of the Matter: Non-Profits and the IRS

Even after filing state incorporation paperwork, you are only recognized as a non-profit organization in the state in which you incorporated. You are not recognized as a tax-exempt organization for any purpose, including sales taxes, until the IRS approves your application as a 501(c)(7) organization.

Once your incorporation paperwork is filed, officer and director roles established, bylaws adopt-ed, and a budget set, you are ready to begin the IRS tax-exempt application process. While the IRS recognizes more than 20 types of tax-exempt organizations, flying clubs are normally only eligible for tax-exempt status under one federal rule: Internal Revenue Code Section 501(c)(7).

Here are a few definitions to help sort through some technicalities.Tax-Exempt Organization – This is an organization recognized by the IRS as exempt from the

payment of federal income tax. It is not exempt from payment of employment taxes; and is only exempt from state and local taxes upon application and approval by that particular state, govern-mental entity, or municipality.

501(c)(3) organization -- Also known as a public charity or private foundation. Donations to 501(c)(3) organizations are tax-deductible by the donor. Other than governmental entities, 501(c)(3)s are the only type of tax-exempt organization where contributions are tax-deductible by donors or contributors. The type of flying clubs described in this Manual are not eligible for this classification by IRS.

501(c)(7) organization – A social and/or recreational organization recognized by the Internal Rev-enue Service as federally exempt from tax on the income derived from its exempt functions, i.e. membership dues, initiation fees, aircraft rental, and other similar income. Unlike other tax-exempt organizations, 501(c)(7)s are taxed on investment income such as interest on bank accounts or Certificates of Deposit. A 501(c)(7) is subject to specific requirements by the IRS for providing orga-nized social and recreational programs for its members. It is only exempt from paying sales and use taxes, local taxes, and property taxes upon application to the particular state or local tax-ing authority and subsequent approval for exemption by that authority.

Flying clubs are specifically recognized by the IRS as having a tax-exempt purpose under Section 501(c)(7) of the Internal Revenue Code, as long as a few rules are followed:

1. The club must be organized for “pleasure, recreation and other non-profitable purposes, sub-stantially all of the activities of which are for such purposes and no part of the net earnings of which inures to the benefit of any private individual”. Internal Revenue Code Section 501(c)(7). Inurement would include things like excessive interest rates paid to a member, unreasonable salaries, or un-


substantiated distributions to members.2. The club’s members must have regular personal contact, general fellowship, social activities,

and person-to-person comingling. In other words, personal contact between members is required for a social and recreational club. Simply owning one or more aircraft, allowing the members to schedule and use the aircraft, and contribute to the finances of the club is not enough. There must be a social and recreational purpose to the club and that purpose must be fulfilled by regular social contact between members. The annual Christmas Party is not enough, but, for example, potluck suppers once a month would fulfill the IRS requirements for social interaction.

3. The club cannot have a written policy of discrimination prohibiting membership based on race, religion, or color.

Assuming you meet these general requirements for a social and recreational flying club, how do you convince the IRS?

There are two ways to inform the IRS your functions are tax-exempt and the club deserves the coveted 501(c)(7) status. The first is to complete the not overly complicated IRS Form 1024 and at-tach the required documentation. The second is to “self-declare.”

Self-declaration is not recommended since it has many pitfalls, but it will nevertheless be dis-cussed below for clarification and an explanation as to why it is not recommended.

The IRS 1024 ApplicationForm 1024 (see Appendix) is not a complex form. It asks for some basic information, name of

the club, address, EIN, a narrative on your operational activities, some additional specific questions about operations, and an anticipated budget for your first 5 years and a signature. You will also need to attach copies of your Articles of Incorporation and Bylaws.

The form is not highly complicated, but when you draft your narrative of operational activities, be sure to be accurate, truthful, detailed, and comprehensive. You can add attachments, and they are encouraged.

When completing the narrative it is imperative to demonstrate the social and recreational nature of the club and give specifics. You might say something like:

“Club 1024 has bi-weekly meetings of all members, we meet once a month for potluck suppers, and often fly together as friends. We attend social events together as a club, sponsor charitable events as a club, and regularly meet for coffee or lunch. We frequently get together as members to wash and maintain the aircraft and usually gather socially afterwards.”

The important point to truthfully and accurately make to the IRS is that the members of the club meet regularly on a social and recreational basis. It doesn’t matter if the club has three members or 33. A tax-exempt social and recreational club must demonstrate a social and recreational purpose.

IRS Form 1024 has a detailed set of instructions. (See Appendix.) IRS Publication 557 has addi-


tional information and the Appendix has links to specific IRS rulings that provide even greater detail. Once filed, it can take up to 6 months or longer for IRS to review and approve the application.

However, you can and should operate as originally planned and described in your governing docu-ments. You do not need IRS approval to begin club operations, but the IRS approval letter will come in handy when seeking any available sales tax exemptions.

Filing CostsAs of the date of this publication (July 2014), IRS Form 1024 requires a filing fee of $400 if you

expect to have average annual gross receipts of not more than $10,000; and $850 if more than $10,000. The average is what you would estimate your expected gross receipts would be over the next four-year period. Your initial start up costs should be included in this average.

The 1024 Application also requires IRS Form 8718 to be included with the application package. Form 8718 is a simple one-quarter page form with instructions included. It has a box to check for the amount of your filing fee. (See Appendix.)

When filing the 1024 application package, be sure to double check that all requested materials are included. A checklist is included with the form. It will shorten the IRS application approval pro-cess if all requested materials are included.

Annual IRS Tax Filings Once approved, the club will be required to file an annual tax return with the IRS. Depending on

your average annual gross income and total assets, you will be required to file one of the following:990N ePostcard – a very simple, online form that simply lets the IRS know you remain opera-

tional. If your annual gross receipts are normally $50,000 or less, you are eligible to use this form. 990-EZ – the annual tax return required if the club has annual gross receipts of more than

$50,000 but less than $200,000 and total assets of less than $500,000. 990 – the annual tax return required if the club’s annual gross receipts are $200,000 or greater or

it has assets of $500,000 or greater. 990-T – the annual return filed in addition to the appropriate 990 above, to declare any taxable

income of the club such as investment income. Any organization, no matter how small, may always complete the full 990. Filing the 990-EZ or

990 will require the assistance of a CPA. If a tax return is not filed for three (3) consecutive years, IRS will revoke the club’s tax-ex-

empt status. Tax-exempt status can be re-acquired retroactive to the date of club formation, but it is a costly and lengthy endeavor.


Self-Declaration and Why It’s Not RecommendedIRS Form 1024, per its own instructions and IRS policy, is not technically required for an organi-

zation to be recognized by the IRS as a tax-exempt social and recreational club. All an organization would theoretically need to do is send a letter to the IRS Tax Exempt and Governmental Entity Unit in Cincinnati stating they “self-declare” as a 501(c)(7). This policy was established many years ago so very small organizations would not need to bother with all the technical tax rules and IRS wouldn’t need to keep track of thousands and thousands of small organizations.

This policy still exists today, but as a practical matter, if you want insurance as a social and rec-reational club, insurers will want to see your state and federal documentation, and banks will want to see your tax-exempt letter from IRS. Few banks and insurers, if any, understand the rules of self-declaration. Additionally, the club will still need to file an annual tax return, must still be able to demonstrate a tax-exempt social purpose, and will still be subject to audit. Why not take the extra step and file the simple 1024 application? It will make life a lot easier, especially since the club will have members and significant assets in the form of aircraft. Filing Form 1024 and having an official IRS approval letter also adds to the layers of liability protection you will want.

Sale of Club Assets: Federal Taxation and ExemptionA special rule exists for property sold by a 501(c)(7) organization that may exempt it from paying tax on

gains from the sale.

1. If the assets sold were assets used for its exempt purpose (for our purposes that would be the club-owned aircraft, for example); and

2. From one year before the sale to three years after the sale, the proceeds of the purchase were used to purchase other property to be used for its tax-exempt purpose;

3. Then the gain, if any, will be recognized as taxable income only to the extent the sales price of the sold property exceeds the cost of the new property.

Example 1: The club sells its aircraft in 2014 for $60,000 realizing a $20,000 gain. The club then purchases another aircraft in 2015 for $65,000. The sales price of the sold property does not exceed the cost of the purchased property, therefore none of the $20,000 gain is subject to federal taxa-tion.

Example 2: The club sells its aircraft in 2014 for $60,000 realizing a $20,000 gain. The club then purchases another aircraft in 2015 for $50,000. A gain is taxable to the extent the sales price exceeds the purchase price. The sales price exceeds the purchase price by $10,000, therefore $10,000 of the $20,000 gain is taxable and the remaining $10,000 gain is exempt from taxation.


State and Local TaxesSpecific to each state are the requirements to collect and pay sales and/or use taxes. Every state

is different and an exhaustive discourse on the requirements of each state is beyond the scope of this Manual. However, there are a few things to keep in mind:

The following states impose no state sales taxes: Alaska, Delaware, Montana, New Hampshire, and Oregon.

Some states with sales taxes may actually have exceptions for particular transactions, such as “only one purchase or sale in a 12-month period,” “sales between related parties,” or “sales of air-craft to be removed from the state and not operated there.” A CPA or local attorney can help navi-gate these technicalities for the club.

Use taxes are taxes specifically related to the value of an item used, consumed, or stored in a particular state or locality. An aircraft hangared or tied-down may be subject to a use tax in some locations even if a sales tax was not imposed. Use taxes are fairly universal, are not well publicized or heavily enforced and can be fairly tricky. A knowledgeable aircraft seller or dealer will advise you on potential use taxes for a sales transaction or even help you find that one exception that could help save thousands of dollars on an aircraft transaction.

What is the difference between a sales tax and a use tax? A sales tax is a state or local tax im-posed on the sale (transfer) of tangible personal property (not real estate). It may be imposed on the seller or buyer of an aircraft and may require either the seller or buyer to collect and pay the tax to the state or local taxing authority when the sale is consummated. A use tax is a tax specifi-cally attached to the value of tangible personal property (not real estate) that is used, consumed, or stored in a particular jurisdiction, and is imposed, enforced, and collected by that jurisdiction, usu-ally a state or local taxing authority. Generally, if a sales tax is imposed on a transaction, a use tax will not be imposed and vice versa, but this is not always true. Seek competent advice in this area.

Local (city and county) taxes may still apply in every state and every jurisdiction. If the club owns a hangar, there may be property taxes levied on it. However, for every tax imposed, the 501(c)(7) may be able to request an exemption from that taxing authority as a tax-exempt entity.


Chapter 5: Operational RulesEstablishing how your club will function—its operational rules—is another critical stage in your

club’s formation. Club rules will help create the culture of your club and set the stage for how smoothly your club operates. Here’s an important list of subjects to consider:

1. How often will your club meet? How will you make club meetings interesting and engaging?2. What will your leadership structure be? How will you manage transitioning from one group

of leaders to another? What will happen if an officer or director fails to live up to their responsibili-ties? How would you remove that officer?

3. How will you manage scheduling? Scheduling is often one of the trouble spots in a flying club. An online system is imperative, and there are several options. How will the club handle the situation if a club member fails to return the aircraft on time? How far in advance will a member be able to reserve the club aircraft?

4. Will the club allow night flying? This can often be touchy point with insurance companies.5. For how long will a member be allowed to schedule the aircraft--a day, three days, a week?6. Will the club offer flight training? If not, will there be a minimum number of hours required

for a pilot to join?7. What will the club’s currency requirements be?8. Will you allow IFR flight, assuming the aircraft is IFR equipped?9. What will the club’s maintenance policy be? How will members report maintenance issues?

What will happen if a member doesn’t report a maintenance issue?10. Will the club have a requirement for members to attend safety programs?11. How will the club determine if a member will be approved? 12. How will the club handle a situation where a member doesn’t pay his dues or for rental of

the aircraft?13. How many members will your club allow?14. Will the club allow members to take a “furlough” from the club? For how long? How will

billing be handled in that situation?15. Does the airport you are going to base at have flying club or airport tenant operational

rules that will affect your club rules? FAA Order 5190-6B FAA Airport Compliance Manual places a number of restrictions on some club operations at airports that receive federal assurance fund-ing. Non-profit clubs get a “pass” on some of the restrictions. Before starting your club, contact your airport of intended operation to verify your intended flying club structure is an approved op-erational activity.


While it’s not fun to think about negative issues, clarifying how your flying club will handle such issues up front will go along way toward preventing problems once the club is functioning. It will also give potential members a sense of safety toward being a member of the club. EAA recom-mends you research the bylaws and operational rules of other clubs to make sure you are covering all possible areas of conflict. Use the Internet to your advantage to review the rules of as many fly-ing clubs as time allows you.


Chapter 6: Acquiring an AircraftThe process of acquiring an aircraft can be challenging, and it is best approached with patience.

First, the club needs to clearly identify the type of aircraft it is seeking in relation to the mission of the aircraft/club. What level of instrumentation is desired? What level of operating expenses (fuel, maintenance) is the club willing to support?

Next, a price range must be agreed upon. Then, the club must determine the parameters of what it will and won’t accept regarding the condition of the aircraft. Does the club want an aircraft that can be flown back to the club’s base and immediately made available for use or is the club willing to invest some money in restoring or repairing an aircraft?

Once the above questions have been answered, it’s time to start shopping. EAA’s Charlie Becker highly recommends shopping locally. “I’ve observed people find an airplane online and negotiate a purchase price for a plane halfway across the country. All they have seen at this point is pictures. They buy an airline ticket and have it all planned out how they will fly the airplane home only to find that when they see the airplane ‘in person’ it falls way short of their expectations ...but they buy it anyway! They get emotionally invested in an aircraft they have never seen up close and somehow, just can’t bring themselves to walk away.. If you stick with an aircraft that is local, you’ll never let this happen.”

If the airplane of the club’s dreams ends up being a distant sale, make doubly sure the aircraft meets the parameters the club members have established.

Acquiring the AircraftWhen starting up a flying club, one question regarding aircraft acquisition will be: Who will own

the aircraft? Non-profit flying clubs with 501(c)(7) tax-exempt status may choose to lease an aircraft for their activities; or in the alternative, the club (or its members) may choose to purchase an air-craft.

As a non-profit incorporated flying club and one that hopes eventually to be recognized as tax-ex-empt under Section 501(c)(7) of the Internal Revenue Code, your club will not have stock or shares. The club also will not pay dividends, but that does not mean it can’t generate income and have a healthy reserve of funds for operations.

If the club decides to lease an aircraft, the funds would generally come from initiation fees, monthly dues, or hourly use payments. It is permissible to lease an aircraft from a member or members of the club, as long as the lease is done as an “arms-length” transaction, no conflicts of


interest exist, the lease rate is reasonable and the aircraft owner doesn’t realize any other type of benefit not available to other members of the club, such as exemption from paying monthly dues.

As an alternative to leasing, many clubs anticipate purchasing an aircraft (or two) for the simple purpose of reducing the costs associated with aircraft operation and providing economical flying for its members.

There are numerous ways to structure start-up funding. One option may be all of the start-up members agree to advance some funds, either equally or in some percentage, towards the pur-chase. Those funds could then be considered a loan by the contributing members to the organiza-tion to be paid back over time out of initiation fees, monthly dues, or other member contributions. Under this scenario, the aircraft would be owned in the club’s name. Ownership of the aircraft by the club itself is preferable because it may provide an extra layer of liability protection, can make the IRS tax-exemption process go more smoothly, and may allow for easier bookkeeping and tax compliance.

Example: Six individuals wish to form a club and purchase an aircraft for $30,000. One member contributes $20,000, another contributes $10,000 and the remaining four contribute no cash. The loan could be structured and set up at zero percent interest (interest may be charged as long as it is a reasonable rate), payable in monthly installments over a 5-year period or some other agreed-upon formula that works for all the members. The loan would be secured by the aircraft. If the loan had a remaining balance when for whatever reason the members decided to wind down and dissolve the club, the loan agreement would provide that the lending members be paid back first out of the sale of the aircraft and any other assets of the club.

Since there are a variety of ways to structure start-up and acquisition funding, it is imperative to seek the advice of an attorney and CPA to ensure that not only the needs of the members are met, but also that all transactions are conducted at arm’s length, are reasonable and customary, don’t trigger unintended legal or tax consequences, and don’t create any conflicts of interest be-tween members. Defining and handling conflicts of interest should be detailed in the bylaws of the organization.

NOTE: Before formally agreeing to any particular type of ownership structure, be sure to check with the airport of intended operation for any limits or requirements for flying clubs. Some airports have unusual requirements, so before you go out and spend a lot of money, it would be wise to make a phone call or pay a visit to see what may be required. Please see FAA AC 5190.6B for applicability.

If the club wishes to eventually attract additional members, prospective new members might be provided the option of joining the club through initiation fees or by contributing additional funds. Again, there are numerous ways to structure funding from new members, so be sure to seek com-petent advice in this area.

No matter which way the club is structured and operated, the Articles of Incorporation and By-


laws will need to provide for a method of distribution for any remaining assets of the club (including aircraft) upon club dissolution. Most 501(c)(7) club organizing documents include a clause outlining the distribution of the remaining assets to members according to a previously agreed upon percent-age. In other words, if four members supplied the initial funds in equal amounts, and those same four members remained at the time of dissolution, the assets could be distributed to them in equal proportions. If more members join the club, distribution of remaining assets to later joining mem-bers must also be outlined in the Articles and bylaws. For additional information, see Chapter 11, Winding the Club Down.

Larger clubs will need to ensure the governing documents and financial records all account for proposed income, expenses, and distribution of assets according to a plan. Larger clubs should also seek the advice of a knowledgeable CPA on these issues and for regular bookkeeping.

Building an Aircraft for a Flying ClubA question that often comes up from EAA members is, “Can we take a chapter aircraft building

project and form a flying club around it? That’s not a surprising question considering that EAA and its members are the chief advocates for building your own aircraft. However, there are some special concerns to consider when you go down this path.

Many EAA chapters receive their 501(c)(3) status based on the great charitable works that they do (e.g., flying Young Eagles, promoting aviation to youth, educating members on aviation safety, etc.). This status allows donors to take a tax deduction for a contribution of cash or other assets (like an uncompleted aircraft project) that are donated to the chapter. This will often get the chapter or a subset of chapter members interested in building the aircraft to completion and then they may want to fly the aircraft as a flying club. Sounds like a good idea, but before it goes any further, you must be aware of some of the pitfalls.

First, EAA chapters are allowed to build and restore aircraft. However, they cannot fly the aircraft as a chapter aircraft. It must be sold prior to any flights taking place.

Second, if a chapter has attained 501(c)(3) status, the chapter must avoid any “private inurement” or “excess benefit” transactions by making sure all dealings with members are at arm’s length and at fair market value. This is important to keep in mind because if a chapter were to complete a donated kit and then sell it to a group of members interested in starting a flying club, the sale price must be equal to what the aircraft would be worth on the open market. Clearly a finished kit aircraft in flying condition is almost always worth more than the sum of its parts. If the sale is not handled correctly, it could jeopardize the chapter’s charitable status or create unintended tax conse-quences for the chapter and the donor. The rules regarding donated aircraft or kits where the chap-ter performs “material improvements” (i.e., builds or finishes building the kit) are highly complex. IRS Publications 4302 and 4303 (www.irs.gov/pub/irs-pdf/p4302.pdf and www.irs.gov/pub/irs-pdf/


p4303.pdf shed some light on the matter, but it’s best to seek the advice of a knowledgeable ac-countant or attorney when contemplating such a transaction. After all, you will want to do what’s best for the chapter, the flying club, and the donor.

A third consideration is whether the donated kit is the right aircraft for a flying club. Would the backers of the idea be better off starting with a new kit that is a known quantity with proven han-dling characteristics?

Finally, if the donor contemplates taking a deduction for the contribution of the kit, the donor should discuss the transaction with a knowledgeable accountant or attorney before making any moves. Again, the rules on donated aircraft are complex and some good advice up front will go a long way to protect against any unintended consequences. This EAA webinar, presented by EAA Legal Advisory Council Attorney Patti Arthur, discusses the details of donating an aircraft (http://eaavideo.org/video.aspx?v=1256730868001)

FAQs Regarding E-AB and Flying Clubs1. What is the recommended way to approach building an aircraft and having a chapter

involved?EAA’s recommendation is that the aircraft project be owned right from the start by the separate

flying club entity. The chapter and its members may still be actively involved in the building process as that is a valuable educational opportunity for the chapter members. What better way to learn about homebuilding than to help build an aircraft? If the flying club owns the aircraft from the start, that will eliminate any concerns over the increase in value that occurs when a kit becomes a flying aircraft; however, it will not provide a charitable deduction to the donor. Only donations to 501(c)(3)’s are eligible for a charitable deduction. Donations to 501(c)(7) flying clubs are not tax deductible. Additionally this approach may also provide the added benefit of keeping a project from becoming a divisive financial issue within the chapter.

For example, in April 2005 the leaders of EAA Chapter 1279 based at the French Valley Airport in Southern California launched a Saturday Morning Builders’ Workshop program for the benefit of those members who would like to learn the skills necessary to build and fly their own airplane. Now, in 2014, this airplane is finished and flying. The airplane is owned and flown by Steve William-son and his partner, both are officers in Chapter 1279. It proudly bears the logo of EAA Chapter 1279 at French Valley and represents the chapter wherever it goes.

2. Can a flying club purchase an E-AB aircraft and use it as its club aircraft?Yes. The core restriction found in the operating limitations (which are part of the airworthiness

certificate) on E-AB aircraft is a prohibition on “carrying persons or property for compensation or hire.” This eliminates E-ABs from being rented by a CFI to a student for flight instruction. It also rules out things like receiving compensation for delivering items in your aircraft or carrying a pho-


tographer up for aerial shots. The fact that you have to be a member to use the aircraft differenti-ates it from an aircraft rented from an FBO.

3. What if the flying club is organized as a non-profit membership organization (501(c)(7))?Yes. Since the aircraft is limited to members of the organization, rental to members is acceptable.4. Who may maintain an E-AB aircraft purchased by the club?Any work, not just maintenance, on an E-AB can be performed by virtually anyone regardless of

credentials. FAR Part 43 specifically states that the rules of that part do not apply to experimental amateur-built aircraft. Even though anyone can maintain the aircraft, it may be best to use a licensed mechanic to conduct your maintenance.

However, the annual condition inspection can only be performed by a licensed airframe & power-plant (A&P) mechanic or by the original builder of the airplane, provided the builder has a Repairman Certificate for that aircraft from the FAA. Note that unlike an annual for a type-certificated aircraft, the A&P mechanic does NOT have to have his/her Inspection Authorization”.


Chapter 7:Financing a Club Aircraft

For well-established flying clubs, finding financing to purchase an aircraft should be relatively easy, however start-up clubs will have more difficulty.

To learn more about the aircraft financing market for flying clubs, EAA consulted with Kevin Buckland, president of the National Aircraft Financing Company (NAFCO—online at www.airloan.com). NAFCO has been offering aircraft financing for individuals, flight schools, and flying clubs for more than 20 years, including for-profit and non-profit clubs. However, NAFCO offers financing only to equity-based clubs. It does not offer financing for non-equity clubs. Buckland said that’s because financing underwriters won’t write loans for non-equity clubs in the piston engine market at this time. Buckland noted that prior to 2008 financial crisis, more lenders would write loans for flying clubs and leaseback arrangements, but he said the market has shrunk considerably since then.

In the course of making a particular loan, underwriters will consider: 1. The year, make, model, and condition of the aircraft being financed; 2 The expected usage of the aircraft; and 3 The club’s ability to repay.Factors that might cause a lender to refuse a loan on a particular aircraft include:1. Missing logbooks;2. A high-time airframe (e.g., 10,000 hours or more);3. An unairworthy aircraft or one having a significant/major damage history.Because an aircraft owned by a flying club is expected to be flown more frequently than a pri-

vately owned aircraft, the term (repayment time) of a loan to a flying club will be shorter than a loan made to an individual owner, the down payment required will be slightly higher (20 to 25 percent versus 15 percent for an individual), and the interest rate on the loan will be slightly higher (perhaps .5 percent higher). Buckland explained that’s because the value of a flying club airplane may dimin-ish quicker than a privately owned aircraft because of more use and the lender will want to avoid becoming “upside down” on the value of the aircraft; that is, have the aircraft be worth less than the amount of the loan.

In addition, NAFCO would require at least one member of the club who had the financial where-withal to fulfill the loan payment to sign for the loan. “We don’t require all members of the club to sign for the loan, but at least one person must,” Buckland said. That’s because a lender’s first re-course to recover the loan amount is from the signer, followed by the aircraft as collateral.

Buckland also noted that NAFCO does write loans for experimental amateur-built (E-AB) kits and


aircraft, within the following limitations:1. There must be at least 25 examples of that model E-AB actively flying and listed on the air-

craft registry in the United States.2. The model must be listed in the Aircraft Blue Book and/or VREF.3. The model must still be offered for sale in the United States.Lenders will consider the flying club’s length of operation, its overall stability (how long have

members been involved), and its corporate structure in establishing the rates it will offer any par-ticular club.

What about Loans for Start-Up Clubs?New flying clubs may have a more difficult experience in securing an aircraft loan as most aircraft

lenders will not write loans to new clubs.Instead, new flying clubs should finance their aircraft through advances from members so that

no third-party lender is needed. In such an equity club, it’s important that the club pay particular at-tention to the criteria that will determine how and when a member can enter and exit the club. The club should seek the counsel of an attorney and insurance agent familiar with flying club operations to structure the club’s by-laws in this regard.

Local banks/lending institutions are also a place for a start-up club to seek financing, however, it is also likely the institution will require one or more club members to sign for the club’s loan. Ask pilots and others around your local airports for information on banks that have shown an interest in financing aircraft as then the institution will already have some knowledge about aircraft markets, insurance issues, etc.

Financing a club aircraft may not be easy, but be creative, choose your aircraft carefully, and never give up.


Chapter 8: Insuring Your ClubGenerally speaking, flying club insurance is readily available. According to Bob Mackey, manager

of EAA’s Insurance Plan administered by Falcon Insurance, there are five to six aviation insurance underwriting companies that write policies for flying clubs. While that doesn’t offer a lot of options, it is a sufficient market. Many of the companies will only write for certain niches. Some companies will insure homebuilts; some will do warbirds and floatplanes, but they won’t touch helicopters. Others will only quote on standard category aircraft.

Some triggers that will determine the cost of club insurance include:• Pilot experience levels; the club’s rates will be underwritten to the lowest qualified pilot,• The complexity of the club’s aircraft.• Where the aircraft is stored/operated. • The club’s recurrency rules. • Whether night flight is allowed. • Whether the club allows aircraft to be used for primary training. (Club insurance including stu-

dents is available for standard category and special light-sport aircraft.)• The number of seats in the airplane, especially if it’s more than four seats Two different types of insurance are recommended for a flying club aircraft: liability and hull

coverage.

Liability InsuranceLiability insurance is critical, but it will be the least expensive part of the club’s total insurance

package, representing about 30 to 35 percent of the premium. Typical limits are $1,000,000 per oc-currence for bodily injury and property damage, with a sub-limit of $100,000 per passenger. Liability insurance pays for injury or property damage resulting out of the ownership and/or operation of the aircraft. Mackey described these scenarios in which liability insurance would cover the club.

“If a club member walked into the prop, or a club member flew the aircraft to another airport and someone climbed up on the wing to look inside and fell off and broke an arm, the club will have $100,000 to cover that individual’s medical expenses.”

He also offered these examples, “Let’s say I’m flying with you, the club member, as a passenger and the engine quits, and we land in a field and the airplane flips over and I’m injured. The club has $100,000 to cover my medical expenses, which isn’t necessarily a lot, but that’s what most insurers will provide.”


But he offered this caution about the wording of liability of coverage. “Make sure the wording says the limit is per passenger rather than per person.” The club’s liability insurance also should include the owner of the hangar/airport or whomever the club has a contract for storage of the air-craft as a named insured.

Hull InsuranceHull insurance covers any physical damage to the aircraft and typically will be about 65 percent

of the insurance premium. The cost of hull insurance is directly related to the cost of repairing the aircraft. For example, a Super Cub, because it’s a tube-and-fabric aircraft, is going to cost more to repair and insure than a Cessna 180, for which parts and repair facilities are more numerous. Homebuilt aircraft owners always pay more for hull coverage because of the difficulty in finding a repair facility.

Mackey offered this advice about hull coverage. “Hull insurance for an airplane is a stated value. If the insured value of the aircraft is $60,000 and the insurer totals the aircraft, the club will receive $60,000. It’s not like automobile insurance where the company will only reimburse you for the cur-rent value of the auto. Instead, the insurance company will pay the club the full amount of what the aircraft was insured for.”

Because of that, Mackey said it’s important to insure the airplane for the right value; don’t over or underinsure. He gave this example, “If you have a $60,000 aircraft and insure it for only $30,000 to save money and the aircraft is damaged in an accident with a $20,000 loss, the insurance company may elect to total the airplane and write you a check for $30,000…and your club is out an airplane that could easily have been fixed. And you don’t have enough money to replace the $60,000 aircraft.”

But he also advised against over insuring as well. “Stay on top of the value of your aircraft from year to year. It may start out as a $100,000 aircraft, but in five years it only may be worth $75,000. But if you don’t adjust the insured amount down, the insurance company could decide to repair the aircraft even if the damage is more than you want to be involved with…and if the repair history in the maintenance logs will make the aircraft difficult to sell. Stay on top of values. Don’t pay more than you need to, but don’t under insure either.”

Mackey noted that it is possible to go without hull insurance, but he indicated the insurance com-pany would likely increase the liability insurance premium by as much as 25 percent.

It’s also possible to limit the levels of hull coverage. It’s possible to only insure for hull damage when the aircraft is not in motion. By doing so, the flying club could significantly decrease the hull insurance premium and the club’s liability insurance should not go up. Adding “in motion” cover-age—for taxiing up to take off—will push the premium up. Mackey explained, “The more risk expo-sure you add for physical damage, the more the premium will go up.”

Insurance costs will also vary depending upon the number of people in the club; the more


people involved, the more the airplane will be flown and therefore the exposure increases. And, remember, the insurance company will price the club’s policy based on the member(s) with the least pilot experience.

Some Insurance “Secrets” Mackey offered several “secrets” to obtaining more affordable flying club insurance. • Work with an agent experienced with insuring flying clubs. “If you work with an agent that

does a less than adequate job of presenting your club, you’re going to get a less than desirable result. But, only work with one agent; with the limited number of underwriters writing flying club insurance, if you work with multiple agents thinking you’ll take the best deal offered, your agents will be inappropriately competing with another and creating confusion with the underwriters. Do your research, find an agent you trust, and work with one agent. Call EAA and talk with other flying clubs and take their recommendations. If an agent doesn’t listen to your needs, walk away and find someone else.”

Mackey recommended involving the agent before the club buys an airplane. Allow the agent’s ex-perience in finding insurance help you choose an aircraft that will be insured more easily.

Groups of up to four, five, and possibly even six members can be considered a “partnership” by a potential insurer and solely for insurance purposes. But once you exceed six members, insurance companies will likely treat the group as a flying club.

Comparing the rates for an individual owner to those of a flying club, Mackey said that insurance companies typically double the premium for a flying club. “So, if an individual can get get insurance for $1,000 that will become $2,000 for the club, that price will likely hold with up to 10 members in the club, but if you go over 10 to 12 to 15, then you might see another increase …that’s when the insurance companies really start pushing the price up.

• Establish your club’s organizational and tax-exempt structure before seeking insurance. Insur-ance companies look at flying clubs through the lens of their worst experience, so the more busi-ness-like your club is organized, the better the chance your club will get reasonable rates.

Here’s a checklist of items the insurance company will look for:• A legal structure for the club.• Operating rules.• An established maintenance schedule and a designated maintenance officer.• A safety officer and a plan for recurring safety programs.• A professional finance manager.• A professional scheduling program.• Weather minimums for members to fly the club airplane(s).• Recurrency/checkride requirements.


• A designated instructor for conducting flight reviews and/or instructing students. Include the instructor’s qualifications so the insurer knows the instructor is experienced.

• An organized social schedule. Show that the club is more like a family than an impersonal group of disconnected people. If the club has or has applied for federal tax-exempt status as a 501(c)(7) Social and Recreational Flying Club, the social aspect will be covered. You can always take the IRS application paperwork to the insurance agent as additional information.

The more information the agent can provide to the insurance underwriter showing the appropri-ate business-like approach and proper corporate and tax filings of the club, the more likely the insur-ance company will want to quote, and the more quotes a club can get, the more likely they’ll be able to be insured at a competitive price.

• Make sure the aircraft is suitable for a flying club or make sure all the club members have the skills needed to fly the aircraft. The same things that cause an individual owner’s policy to increase will escalate the cost of insurance for a flying club—for example, a retract gear aircraft versus a fixed-gear, a taildragger versus a tricycle-gear.

You’re Buying Lawyers; Not InsuranceLiability insurance includes bodily injury coverage for passengers, non-passengers, and property

damage, but there is also a clause called “supplemental payments,” which Mackey said is one of the most significant parts of the insurance agreement. “Supplemental payments say that in addi-tion to what the insurance company will pay for bodily injury and property damage, it also will pay all other expenses related to the accident, including interest on any judgment and legal fees.”

Mackey explained, “If a frivolous lawsuit comes about, the insurance company can’t just simply say it’s a frivolous claim and deny coverage. It’s not the insurer’s decision. The insurance company will hire a law firm to represent the club and the insurance company. As a result of the insurance contract, your club and the insurance company have become partners and the company will defend itself and your club against frivolous litigation. So no matter whether it’s a frivolous lawsuit or liti-gation with grounds, your club gets legal defense, and that’s not part of the limit of coverage. You have $1 million in liability insurance, but the insurance company might pay another $1 million in le-gal fees because they don’t want to pay the claim.”

Likewise, Mackey explained, the insurance company, along with its lawyers, may decide to settle even if they think the suit is frivolous. But the insurer can’t abandon the club. He continued, “The key point here is, if there’s $3 million claim against the club and it has a $1 million policy, the insur-ance company can’t just pay the $1 million and say the club is on its own. The insurance company has to defend the club until a court decision or settlement is made.”


Director’s and Officers Insurance

Director’s and officer’s insurance (known as D&O insurance in the industry) protects the indi-viduals serving as directors/officers against lawsuits resulting from their acts as directors and/or officers. It is available from any local insurance agent/agency that has experience setting up D&O insurance for non-profit and for-profit organizations.

The biggest risk for directors and officers is being sued for failure to live up to corporate and fidu-ciary responsibilities. Mackey offered this example, “Let’s say the directors/officers fail to properly insure the club’s hangar, or fail to pay state or local taxes and this failure was a result of not having regular meetings or informing club members of director actions. In other words, the board of direc-tors dropped the ball and did not properly manage the club and the club’s funds, and as a result of this lack of proper governance, the club incurred liabilities. D&O insurance would cover these direc-tors and officers from their failure to perform.

It’s important to know D&O insurance only protects directors and officers and not the club as a whole.

Insuring HomebuiltsIt is possible to insure a homebuilt aircraft as a flying club airplane, though there are fewer un-

derwriters that will insure homebuilts, and generally they are only interested in covering the more common models, such as a Glastar, RANS, Van’s, Zenith, or Sonex. For airplanes that are more unusual—for example, a Skybolt, a T-18 or any plans-built aircraft—the price of insurance, if it’s avail-able for the model, will escalate.

Again, here’s a direct relation to repairability and the cost of repairs, which will drive the price of the premium. If repair services and parts are readily available, that helps reduce the premium.

Complex homebuilts—aircraft with retract gear—will be significantly harder to insure.If a flying club wishes to own a homebuilt and be open to student pilots, the models that will be

insurable are very limited.


Chapter 9: LIMITING LIABILITYHow can you as a member of a non-profit flying club limit your personal liability? There is an old legal theory just about everyone has heard of called “piercing the corporate veil.”

This means the very existence of the corporate entity ostensibly creates a “veil” or “wall” of se-curity around its shareholders or members protecting them from liability resulting from the acts of the corporation. General partnerships, sole proprietorships, and unincorporated associations do not provide this extra measure of security and must cover potential liability exposure with insurance. Limited partnerships can provide some measure of liability protection to limited partners for the acts of the partnership, but again, insurance is the main source of protection here. Limited liability companies and corporations provide the best levels of liability protection.

A piercing of the corporate veil occurs when some action (or lack of action) on the part of the corporation compromises the protections the “veil” provides. Those actions (or lack of actions) gen-erally involve not following the specific state (and possibly federal) rules and regulations required to operate a corporation.

A properly incorporated, operated, and maintained 501(c)(7) non-profit and tax-exempt flying club, at the very minimum, must do the following to protect its members from personal liability.

1. Properly incorporate your club, conduct regular meetings according to the requirements of your bylaws, ensure your annual state filings are up to date.

2. Maintain a current and accurate registered agent and address with your state of incorporation.3. Keep records of meeting minutes, corporate actions, and other operations. You can keep these

electronically or neatly in a three-ring binder.4. Keep accurate books and receipts. Invest in an electronic accounting system (e.g. Quickbooks)

or hire an accountant to keep your financial records. 5. Regularly review the actions of the officers and directors and hold elections according to your

bylaws.6. Regularly review and update your bylaws as necessary.7. File for tax-exempt recognition with the IRS using Form 1024. 8. File the appropriate annual 990 series tax return. 990N, 990EZ or full 990. This will maintain

your tax-exempt status. If you lose that, or aren’t aware it has been lost, it doesn’t look good. 9. As a 501(c)(7), maintain and document your regular social and recreational activities in meeting

minutes. 10. Acquire and maintain adequate insurance coverage, including general liability insurance.These basic actions are known as “proper governance.” If you run the club as a tightship, it will go a long way toward protecting the members from personal liability for actions of the club.


Again, insurance is your best friend here, but insurance can only help so much if you don’t run the club according to your own operational rules and the appropriate state and federal regulations.

It is worth noting that the club corporate entity, in and of itself, will do nothing to protect a person or member from the consequences of their own actions. Specifically, if you are flying the club plane as pilot in command, you are responsible for your actions as such. If you have an accident and are found personally negligent (e.g., flying without a medical, flying with a known prohibited and un-disclosed medical condition, or flying out of currency), you will be held personally responsible. The simple fact the aircraft is owned by the club, leased, or is owned by several members of the club (including possibly yourself) does not protect you from liability in such cases. However, for other members, if a club plane is involved in such an incident or accident and you are simply a member of the club and were at home on the couch at the time of the incident or accident, then only the pilot and club should be at risk, not you personally The insurer will sort through the details, so make sure all your paperwork is always in order.


Chapter 10:Marketing and Promoting Your Club

Marketing and promoting your flying club is a continuous process. The membership of your club will wax and wane, so creating and maintaining local awareness of the club is important. It’s also important to continue to market the club to your members. Create ways to keep your members involved and actively engaged because word of mouth advertising is the best…and the least expen-sive. Keeping your current “customers” happy is great advertising for future members.

First and foremost, it’s important that your club have a user-friendly website that makes it easy for members and potential members to find the information they need; for members, make online scheduling easy!

But, don’t hesitate to show the character of your club. Include images and videos of club mem-bers socializing together, learning together. Show the joy of allowing the club’s aircraft to take members to the places of their dreams.

Provide all the basic information someone looking for a club would want, such as monthly fees/dues, hourly charges, user requirements, and a link to your bylaws to show your club is an orga-nized business. Equity clubs may want to show current financial statements including the current value of the aircraft.

Most current members of flying clubs highlight the community spirit and the shared learning ex-periences as the most important benefits of a flying club. In marketing and promoting your club, it’s impossible to overemphasize those benefits. And, again, don’t forget to keep selling those benefits to your current members. Everyone’s ability to enjoy their flying hobby suffers high and low points; give your members reasons to fly and keep your club alive and vital.


Chapter 11:Winding Down the Club

There will come a day when it may no longer make sense to continue on with club operations. That could happen for any of a variety of reasons. No matter the reasons, you will want to make sure it is done correctly and legally so no latent liability remains for present or former members.

First, you will want to have a meeting where the current members formally vote on dissolution and distribution of remaining assets. Be sure to keep a record of this action for at least 6 years after the club dissolves.

As a 501(c)(7) organization, your Articles of Incorporation and Bylaws will provide the basic frame-work for distribution of assets upon dissolution. Unlike 501(c)(3) charitable organizations, 501(c)(7)s have the option of distributing remaining assets to club members. There is no requirement to dis-tribute the assets to another tax-exempt organization, although that is allowed if so chosen by the members. Distribution of appreciated assets to club members may have tax implications, so it will be necessary to consult with a CPA to minimize any potential tax consequences for members.

Sale of the aircraft—Depending on your state of operation, point of sale or point of delivery, you may need to collect and remit sales tax on the sale of the assets (mainly the aircraft). Again, as de-scribed in earlier in this Manual, consulting with a knowledgeable and experienced dealer, CPA or attorney may save tax dollars.

State Dissolution—Every state has a procedure for dissolving a non-profit organization. You can find the procedures on the same website where you filed your incorporation or organizational pa-perwork and where you maintain your annual state filings. Basically, it simply involves filing Articles of Dissolution and paying a fee. Some states require publication of dissolution in a local newspaper to lock out creditors from coming after individual members for funds after dissolution.

Federal Dissolution—You can dissolve your organization with the IRS simply by checking the “Final Return” box on IRS Form 990EZ or 990 or selecting the “Organization has gone out of busi-ness” box on the electronic 990N ePostcard. This will let the IRS know you are no longer operating. If you have been filing IRS Form 990-EZ or Form 990, you will need to complete Schedule N to fully describe the distribution of the remaining assets of the club.

Once your dissolution paperwork is filed and accepted by your state of incorporation, inform your insurer of the official date of dissolution. You may also be able to acquire “tail coverage” that will protect the officer, directors, and members for a few years after the formal dissolution.


Chapter 11:Ready . . . Set . . . Go!

This Flying Club Manual gives you the basic information you need to begin the process of organizing a flying club in your locale, but it’s not the only help EAA will offer your group. EAA’s Membership Services team includes several knowledgeable individuals who can assist you with getting your flying club off the ground. Call 1-800-564-6322 and ask to speak to a flying club specialist.

As an EAA member, you’re never alone; fellow members are always willing to assist those who share the love of flight. EAA encourages those who are organizing a new flying club to reach out to other EAA members who are members of active flying clubs. Learning from the successes and/ormistakes of others can be very beneficial.

Now, find some like-minded aviation enthusiasts and start down the path to make your flying experiences more fun and less expensive!

IRS Form 1024 www.irs.gov/pub/irs-pdf/f1024.pdfIRS For, 1024 Instructions www.irs.gov/pub/irs-pdf/i1024.pdfIRS Form 8718 fee schedule www.irs.gov/pub/irs-pdf/f8718.pdfIRS Form 2848 POA www.irs.gov/pub/irs-pdf/f2848.pdfIRS Form 2848 Instructions www.irs.gov/pub/irs-pdf/i2848.pdfIRS Form SS-4 www.irs.gov/pub/irs-pdf/fss4.pdf www.irs.gov/.../Apply-for-an-Employer-Identification-Number-(EIN)-Online - May 19, 2014IRS link to 990N http://www.irs.gov/Charities-&-Non-Profits/Annual-Electronic-Filing-Requirement-for-Small-Exempt-Organizations-Form-990-N-(e-Postcard)IRS 990EZ http://www.irs.gov/pub/irs-pdf/f990ez.pdfIRS 990 http://www.irs.gov/pub/irs-pdf/f990.pdfIRS Pub. 557 www.irs.gov/pub/irs-pdf/p557.pdf

Additional Information:

AOPA completed an extensive research project on flying clubs in 2012. That information is available at: aopa.

org/newsroom/121013flying-club.pdf

FAA AC 00.25 http://www.faa.gov/regulations_policies/advisory_circulars/index.cfm/go/document.information/documentID/22273

IRS Rev. Rul. 74-30 www.irs.gov/pub/irs-tege/rr74-030.pdf (A flying club of limited membership that provides flying privileges solely for its members, assesses dues based on the club’s fixed operating costs and charges fees based on variable operating expenses, and whose members are interested in flying for a hobby, constantly commingle in informal meetings, maintain and repair aircraft owned by the club, and fly together in small groups, qualifies for exemption under section 501(c)(7).)

IRS Rev. Rul. 70-32 www.irs.gov/pub/irs-tege/rr70-032.pdf (A club not having organized social activities for its members does not qualify for tax-exempt status as a social and recreational club.)

Books:Keeping Peace in the Partnership: A Guide to Aircraft Co-Ownership Bruce W. Luedeman; 1996; available from Amazon.com

AppendixOnline Resources

ARTINC_NPC Page 1 of 3 Rev. 2/12/2013

Form must be filed electronically. Paper forms are not accepted. This copy is a sample and cannot be submitted for filing.

Articles of Incorporation for a Nonprofit Corporation filed pursuant to § 7-122-101 and § 7-122-102 of the Colorado Revised Statutes (C.R.S.)

1. The domestic entity name for the nonprofit corporation is ______________________________________________________.

(Caution: The use of certain terms or abbreviations are restricted by law. Read instructions for more information.) 2. The principal office address of the nonprofit corporation’s initial principal office is Street address ______________________________________________________ (Street number and name)

______________________________________________________

__________________________ ____ ____________________ (City) (State) (ZIP/Postal Code) _______________________ ______________ (Province – if applicable) (Country) Mailing address ______________________________________________________ (leave blank if same as street address) (Street number and name or Post Office Box information) ______________________________________________________

__________________________ ____ ____________________ (City) (State) (ZIP/Postal Code) _______________________ ______________. (Province – if applicable) (Country) 3. The registered agent name and registered agent address of the nonprofit corporation’s initial registered agent are Name

(if an individual) ____________________ ______________ ______________ _____ (Last) (First) (Middle) (Suffix) OR

(if an entity) ______________________________________________________ (Caution: Do not provide both an individual and an entity name.) Street address ______________________________________________________ (Street number and name)

______________________________________________________

__________________________ CO ____________________ (City) (State) (ZIP Code)


Mailing address ______________________________________________________ (leave blank if same as street address) (Street number and name or Post Office Box information) ______________________________________________________

__________________________ CO ____________________. (City) (State) (ZIP Code) (The following statement is adopted by marking the box.)

The person appointed as registered agent above has consented to being so appointed. 4. The true name and mailing address of the incorporator are Name

(if an individual) ____________________ ______________ ______________ _____ (Last) (First) (Middle) (Suffix) OR (if an entity) ______________________________________________________ (Caution: Do not provide both an individual and an entity name.) Mailing address ______________________________________________________

(Street number and name or Post Office Box information) ______________________________________________________

__________________________ ____ ____________________ (City) (State) (ZIP/Postal Code) _______________________ ______________. (Province – if applicable) (Country)

(If the following statement applies, adopt the statement by marking the box and include an attachment.)

The corporation has one or more additional incorporators and the name and mailing address of each additional incorporator are stated in an attachment. 5. (If the following statement applies, adopt the statement by marking the box.)

The nonprofit corporation will have voting members. 6. Provisions regarding the distribution of assets on dissolution:


7. (If the following statement applies, adopt the statement by marking the box and include an attachment.)

This document contains additional information as provided by law. 8. (Caution: Leave blank if the document does not have a delayed effective date. Stating a delayed effective date has significant legal consequences. Read instructions before entering a date.) (If the following statement applies, adopt the statement by entering a date and, if applicable, time using the required format.) The delayed effective date and, if applicable, time of this document is/are __________________________. (mm/dd/yyyy hour:minute am/pm) Notice:

Causing this document to be delivered to the Secretary of State for filing shall constitute the affirmation or acknowledgment of each individual causing such delivery, under penalties of perjury, that the document is the individual's act and deed, or that the individual in good faith believes the document is the act and deed of the person on whose behalf the individual is causing the document to be delivered for filing, taken in conformity with the requirements of part 3 of article 90 of title 7, C.R.S., the constituent documents, and the organic statutes, and that the individual in good faith believes the facts stated in the document are true and the document complies with the requirements of that Part, the constituent documents, and the organic statutes. This perjury notice applies to each individual who causes this document to be delivered to the Secretary of State, whether or not such individual is named in the document as one who has caused it to be delivered. 9. The true name and mailing address of the individual causing the document to be delivered for filing are

____________________ ______________ ______________ _____ (Last) (First) (Middle) (Suffix) ______________________________________________________

(Street number and name or Post Office Box information) ______________________________________________________

__________________________ _____ ____________________ (City) (State) (ZIP/Postal Code) _______________________ ______________. (Province – if applicable) (Country)

(If the following statement applies, adopt the statement by marking the box and include an attachment.)

This document contains the true name and mailing address of one or more additional individuals causing the document to be delivered for filing.

Disclaimer:

This form/cover sheet, and any related instructions, are not intended to provide legal, business or tax advice, and are furnished without representation or warranty. While this form/cover sheet is believed to satisfy minimum legal requirements as of its revision date, compliance with applicable law, as the same may be amended from time to time, remains the responsibility of the user of this form/cover sheet. Questions should be addressed to the user’s legal, business or tax advisor(s).

DISS_NPC Page 1 of 2 Rev. 4/02/2012

Form must be filed electronically. Paper forms are not accepted. This copy is a sample and cannot be submitted for filing.

Articles of Dissolution

Nonprofit Corporation Filed pursuant to §7-134-103 of the Colorado Revised Statutes (C.R.S)

ID number: _____________________ 1. Entity name: ______________________________________________________ 2. Principal office address:

Street address ______________________________________________________ (Street number and name)

______________________________________________________

__________________________ ____ ____________________ (City) (State) (ZIP/Postal Code) _______________________ ______________ (Province – if applicable) (Country) Mailing address ______________________________________________________ (leave blank if same as above) (Street number and name or Post Office Box information) ______________________________________________________

__________________________ ____ ____________________ (City) (State) (ZIP/Postal Code) _______________________ ______________. (Province – if applicable) (Country) 3. The nonprofit corporation is dissolved. 4. (Optional) Delayed effective date: ______________________ (mm/dd/yyyy) 5. This document contains additional information as provided by law. Notice: Causing this document to be delivered to the secretary of state for filing shall constitute the affirmation or acknowledgment of each individual causing such delivery, under penalties of perjury, that the document is the individual's act and deed, or that the individual in good faith believes the document is the act and deed of the person on whose behalf the individual is causing the document to be delivered for filing, taken in conformity with the requirements of part 3 of article 90 of title 7, C.R.S., the constituent documents, and the organic statutes, and that the individual in good faith believes the facts stated in the document are true and the document complies with the requirements of that Part, the constituent documents, and the organic statutes. This perjury notice applies to each individual who causes this document to be delivered to the secretary of state, whether or not such individual is named in the document as one who has caused it to be delivered.

DISS_NPC Page 2 of 2 Rev. 4/02/2012

6. Name(s) and address(es) of the individual(s) causing the document to be delivered for filing: ____________________ ______________ ______________ _____ (Last) (First) (Middle) (Suffix)

______________________________________________________ (Street name and number or Post Office Box information) ______________________________________________________

__________________________ ____ ____________________ (City) (State) (Postal/Zip Code) _______________________ ______________ (Province – if applicable) (Country – if not US)

This document contains the true name and mailing address of one or more additional individuals causing the document to be delivered for filing. Disclaimer:

This form, and any related instructions, are not intended to provide legal, business or tax advice, and are offered as a public service without representation or warranty. While this form is believed to satisfy minimum legal requirements as of its revision date, compliance with applicable law, as the same may be amended from time to time, remains the responsibility of the user of this form. Questions should be addressed to the user’s attorney.

1

WARNING! THIS DOCUMENT IS NOT SPECIFIC TO ANY STATE OR JURISDICTION. SEEK COMPETENT LEGAL COUNSEL FOR YOUR PARTICULAR STATE OR JURISDICTION. THIS DOCUMENT ASSUMES THE NON-PROFIT STRUCTURE FOR THE FLYING CLUB.

SAMPLE

ARTICLES OF DISSOLUTION OF

123 FLYING CLUB, INC. A (fill in state) Non-Profit (as appropriate) Corporation

State ID Number: _____________________________________________________

Pursuant to the laws of the state of _________________________, the following entity is hereby dissolved: Name of Corporation:__________________________________________________________ Address of Corporation:________________________________________________________. Name and Address of Registered Agent:___________________________________________ ____________________________________________________________________________ Effective Date:________________________________________________________________ Dissolution is by: [Check One] Vote of the members: [ ] Resolution of the Board of Directors [ ] Administrative Dissolution [ ] Publication of these Articles of Dissolution is [ ] is not [ ] (check one) required. Distribution of the remaining assets of 123 Flying Club, Inc. shall be as provided by law. DATED: __________________________________ /s/ Name: President

1


SAMPLE

ARTICLES OF INCORPORATION OF

123 FLYING CLUB, INC. A (fill in state) Non-Profit (as appropriate) Corporation

Pursuant to the law of the state of _________________________, the Articles of Incorporation of 123 Flying Club, Inc. are as follows:

ARTICLE I The name of the corporation is 123 Flying Club, Inc.

ARTICLE II The corporation shall have members. The criteria and procedures for admission to membership and the rights and obligations of members are as set forth in the corporation’s bylaws or amended bylaws.

ARTICLE III

123 Flying Club, Inc. is organized as a social and recreational flying club to promote flying for pleasure, recreation and other social and non-profitable purposes. Substantially all of the activities of 123 Flying Club, Inc. are for such purposes and no part of the net earnings of these activities shall inure to the benefit of any private individual or member. Furthermore, notwithstanding any other provision of these articles, this corporation shall not engage in any activities or exercise any powers that are not permitted to be carried on by a corporation exempt from the federal income tax under Section 501(c)(7) of the of the Internal Revenue code or the corresponding section of any future federal tax code.

ARTICLE IV Upon dissolution of the corporation, the assets of the corporation, if any, shall be distributed to the members of 123 Flying Club, Inc. pursuant to its bylaws, the laws of the State of _____________, and the appropriate sections of the Internal Revenue Code or the corresponding section of any future federal tax code. Any such assets not so distributed shall be disposed of by

2

a Court of Competent Jurisdiction of the county in which the principal office of the corporation is then located, exclusively for such purposes or to such organization(s) as said Court shall determine, which are organized and operated exclusively for such purposes.

ARTICLE V The address of the corporation is: _________________________________________ The name and address of the corporation’s registered agent are: __________________________________________________________________________________________________________________________________________________________________________________________________________________________________________ The name(s) and address(s) of the individual(s) or organization(s) causing this document to be filed are: __________________________________________________________________________________________________________________________________________________________________________________________________________________________________________ DATED: __________________________________


SAMPLE BYLAWS

OF 123 FLYING CLUB, INC.

[Insert Revision Number and Date when Bylaws are Revised]

ARTICLE I. GENERAL

Section 1. The following paragraphs contain provisions for the regulation and management of 123 Flying Club, Inc. (the “Club”), a [insert State] nonprofit [not-for-profit, non-stock as appropriate] corporation. Section 2. If there is a conflict between a provision of these bylaws and a mandatory provision of the Articles of Incorporation of the corporation, or a mandatory provision of the laws of the State of __________________, the mandatory provision(s) of the laws of the State of _________________ or of the Articles of Incorporation of this corporation shall control. Section 3. Purposes. 123 Flying Club, Inc. is organized as a social and recreational flying club to promote flying for pleasure, recreation and other social and non-profitable purposes. Substantially all of the activities of 123 Flying Club, Inc. are for such purposes and no part of the net earnings of these activities shall inure to the benefit of any private individual or member. Furthermore, notwithstanding any other provision of these articles, this corporation shall not engage in any activities or exercise any powers that are not permitted to be carried on by a corporation exempt from the federal income tax under Section 501(c)(7) of the of the Internal Revenue code or the corresponding section of any future federal tax code.

ARTICLE II. OFFICES

Section 1. The principal office of the corporation shall be located in the State of ____________________. The corporation may have such other offices, either within or outside the State of ____________________, as the Board of Directors may require from time to time.

Section 2. The registered office of the corporation required by the laws of the State of ________________________, to be maintained in the State of _________________ may be, but need not be, identical with the principal office in the State of _____________________, and the address of the registered office may be changed from time to time by the Board of Directors.

ARTICLE III. MEMBERS

Section 1. The corporation shall have members. The total number of members shall be established by a majority vote of the membership present at a regular or special meeting. The total number of Club members will be established based on appropriate insurance considerations. Section 2. - An application for membership shall be considered and voted on by the board of directors present at a regular monthly meeting. Applicants for membership must hold, at a minimum, a private pilot certificate and a current third class medical certificate [adjust as necessary]. Section 3. - No membership shall be transferred, sold, pledged or assigned without the express written consent of a majority of the board of directors. Section 4. – Terminated members and outgoing members remain responsible and liable for any and all Club obligations until a replacement member takes their place. This includes monthly dues and any other obligations that may exist and any new obligations incurred. [Optional: This language prevents a member from quitting over a disagreement and avoiding their share of the obligation].

ARTICLE IV. AMENDMENT OF BYLAWS

Section 1. The power to alter, amend, or repeal the bylaws or adopt new bylaws is vested in the Board of Directors [or members]. The bylaws may contain any provisions for the regulation or management of the affairs of the corporation not inconsistent with the law or the Articles of Incorporation. Section 2. These bylaws may be amended at any time by a majority vote of the Board of Directors [or members] present at a regular or special meeting of the Board [or membership], provided that at least five (5) days prior notice has been given, including the language proposed to be changed, added or deleted in accordance with the notice requirements of these bylaws.

ARTICLE V. BOARD OF DIRECTORS

Section 1. General Powers. The affairs of the corporation shall be managed by a Board of Directors.

Section 2. Number, Tenure and Qualifications. The number of directors of the corporation shall be not less than three (3) and no more than five (5). Each director shall hold office for three (3) years from the date of their election [term length is optional]. The terms of the directors of the corporation will begin immediately following their election. The members of the Board of Directors shall be elected at annual meeting or at a special meeting called for that purpose. All current directors shall be entitled to participate in the annual election of directors. Directors shall be natural persons of the age of eighteen (18) years of age or older. Section 3. Vacancies. Any director may resign at any time by giving written notice to the president or to the secretary of the corporation. Such resignation shall take effect at the time specified therein; and unless otherwise specified therein, the acceptance of such resignation shall not be necessary to make it effective. Any vacancy occurring on the Board of Directors, and any directorship to be filled by reason of an increase in the number of directors may be filled by the affirmative vote of a majority of the remaining directors. Upon affirmative acceptance of election or appointment to office, such director shall be installed immediately. Section 4. Regular Meetings. A regular annual meeting of the Board of Directors shall be held at _____(time) on the first ____________(day of the week) of _______(month) in each year for the purpose of electing the Directors or for transacting any other business that may come before the Board. Section 5. Special Meetings. Special meetings of the Board of Directors may be called by the request of the President or any two directors. The person or persons authorized to call special meetings of the Board may fix any place, either within or without the State of____________, as the place for holding any special meeting. Section 6. Place of Meetinq. The Board of Directors may designate any place, either within or without the State of ______________, as the place of meeting for any annual or special meeting of the Board of Directors. Section 7. Notice. Notice of the annual meeting and any other regular or special meeting of the Board of Directors shall be given at least five (5) days prior to the meeting by written notice delivered personally or sent by mail or electronic notice, to each director and member at the director's or member’s address or email address as shown in the records of the corporation. The attendance of a director at any meeting shall constitute a waiver of notice of such meeting. Neither the business to be transacted at, nor the purpose of any regular or special meeting of the Board need be specified in the notice of notice of such meeting, unless specifically required by law. Section 8. Quorum of Directors. A majority of the minimum number of directors fixed by Section 2 of this Article shall constitute a quorum for the transaction of business. The act of the majority of Directors present at a meeting at which a quorum is present shall be the act of the Board of Directors.

Section 9. Action by Directors Without a Meeting. Any action required to be taken at a meeting of the directors of the corporation or any action which may be taken at a meeting of the directors may be taken without a meeting if consent in writing, setting forth the action so taken, is signed by all of the Directors. This consent shall have the same force and effect as a unanimous vote. Section 10. Compensation. Directors shall not receive any stated salaries for their services, but by resolution of the Board of Directors a fixed sum and expenses of attendance, if any, may be allowed for attendance at each regular or special meeting of the Board. Section 11. Removal of Director. A director with three (3) consecutive unexcused absences from regular meetings shall be deemed to have forfeited office and a vacancy shall occur therein.

ARTICLE VI. OFFICERS

Section 1. General. The officers of the corporation shall consist of a president, one or more vice-presidents, a secretary, a treasurer, and such other officers and assistant officers as may be deemed necessary, each of whom shall be appointed annually by the Board of Directors. Any two or more offices may be held by the same person, except the offices of president and secretary. The officers of the corporation shall be natural persons of the age of eighteen (18) years or older. In all cases where the duties of any officer or employee are not described by the bylaws or by the Board of Directors, such officer or employee shall follow the orders of the president. [THIS PARAGRAPH IS STATE-SPECIFIC. PLEASE CONSULT COUNSEL FOR APPROPRIATE LANGUAGE.] Additional officer positions, including but not limited to Safety Officer, Maintenance Officer and Scheduling Officer may be created upon an affirmative vote of a majority of the Board of Directors at a regular board meeting. Individuals appointed to, and the terms and duties of such officer positions, shall be as established and amended by an affirmative vote of a majority of the Board of Directors as necessary and from time to time. These bylaws shall be amended as necessary to reflect the addition or deletion of additional officer positions. Section 2. Appointment and Term of Office. The officers of the corporation shall be appointed by the Board of Directors at each annual meeting of the Board of Directors. Each officer shall hold office until the first of the following to occur: until his or her successor shall have been duly appointed; or until his or her death; or until he or she has resigned or until he or she has been removed in the manner hereinafter provided. Section 3. Removal. Any officer may be removed by the Board of Directors when in their judgment the best interests of the corporation will be served thereby. The removal of an officer shall be without prejudice to the contract rights, if any, of the officer so removed. Appointment of an officer or agent shall not of itself create contract rights. Section 4. Vacancies. A vacancy in any office, however occurring, may be filled by the Board of Directors for the unexpired portion of the term.

Section 5. President. The "president" shall be the principal executive officer of the corporation and, subject to the control of the Board of Directors, shall in general supervise and control all of the business and affairs of the corporation. The president shall, when present, preside at all meetings of the Board of Directors, and may sign, with the Secretary or any other proper officer of the corporation authorized by the Board of Directors, all documents which the Board of Directors has authorized to be executed; and in general shall perform all duties incident to the office of president and such other duties as may be prescribed by the Board of Directors from time to time. Section 6. Vice-President. The vice-president shall assist the president and shall perform such duties as may be assigned by the president or by the Board of Directors. In the absence of the president or in the event of his or her death, inability or refusal to act, the vice-president shall perform the duties of the president, and when so acting, shall have all the powers of and be subject to all restrictions upon the president. Section 7. Secretary. The secretary shall: (a) keep minutes of the proceedings of the Board of Directors in one or more books provided for that purpose; (b) see that all notices are duly given in accordance with the provisions of these Bylaws or as required by law; (c) be custodian of the corporate records; and (d) in general, perform all duties incident to the office of secretary and such other duties as from time to time may be assigned by the president or by the Board of Directors. Section 8. Treasurer. The treasurer shall be the principal financial officer of the corporation and shall have the care and custody of all funds and other personal property of the corporation and shall deposit the same in accordance with the instructions of the Board of Directors. The treasurer shall receive and give receipts for monies due and payable to the corporation, deposit all such monies in the name of the corporation in such depositories selected by the corporation, and shall pay out of the funds on hand all bills and other just debts of the corporation. The treasurer shall perform all other duties incident to the office of Treasurer and, upon request of the Board of Directors, shall make such reports to it as may be required at any time or as required by law. The treasurer shall have such other powers and perform such other duties as may be from time to time prescribed by the Board of Directors or the president. The treasurer shall also be the principal accounting officer of the corporation, and shall maintain the methods and systems of accounting to be followed, keep correct and complete books and records of account, and prepare and file all local, state, and federal tax returns. Additional officer positions, including but not limited to Safety Officer, Maintenance Officer and Scheduling Officer may be created upon an affirmative vote of a majority of the Board of Directors at a regular board meeting. Individuals appointed to, and the terms and duties of such officer positions, shall be as established and amended by an affirmative vote of a majority of the Board of Directors as necessary and from time to time. These bylaws shall be amended as necessary to reflect the addition or deletion of additional officer positions.

ARTICLE VII.

FIDUCIARY MATTERS Section 1. Indemnification.

(a) Scope of Indemnification. The corporation shall indemnify each director, officer, employee and volunteer of the corporation to the fullest extent permissible under the laws of the State of ______________________, and may in its discretion purchase insurance insuring its obligations hereunder or otherwise protecting the persons intended to be protected by this Section. The corporation shall have the right, but shall not be obligated, to indemnify any agent of the corporation not otherwise covered by this Section to the fullest extent permissible under the laws of the State of _____________________. Section 2. General Standards of Conduct for Directors and Officers.

(a) Discharge of Duties. Each director shall discharge the director's duties as a director, including the director's duties as a member of a committee of the board, and each officer with discretionary authority shall discharge the officer's duties under that authority (i) in good faith; (ii) with the care an ordinarily prudent person in a like position would exercise under similar circumstances; and (iii) in a manner the director or officer reasonably believes to be in the best interests of the corporation.

(b) Reliance on Information, Reports, Etc.. In discharging duties, a director or officer is entitled to rely on information, opinions, reports or statements, including financial statements and other financial data, if prepared or presented by: (i) one or more officers or employees of the corporation whom the director or officer reasonably believes to be reliable and competent in the matters presented; (ii) legal counsel, a public accountant or another person as to matters the director or officer reasonably believes are within such person's professional or expert competence; or (iii) in the case of a director, a committee of the board of directors of which the director is not a member if the director reasonably believes the committee merits confidence.

(c) Liability to Corporation or Its Members. A director or officer shall not be liable as such to the corporation or its members for any action taken or omitted to be taken as a director or officer, as the case may be, if, in connection with such action or omission, the director or officer performed the duties of the position in compliance with this Section.

Section 3. Conflicts of Interest .

(a) Definition. A conflict of interest arises when any "responsible person" or any "party related to a responsible person" has an "interest adverse to the corporation." A "responsible person" is any individual in a position to exercise substantial influence over the affairs of the corporation, and specifically includes, without limitation, directors and officers of the corporation. A "party related to a responsible person" includes his or her extended family (including spouse, descendants and siblings, and their respective spouses and descendants), an estate or trust in which the responsible person or any member of his or her extended family has a beneficial interest or a fiduciary responsibility, or an entity in which the responsible person or any member of his or her extended family is a director, trustee or officer or has a financial interest. "An interest adverse to the corporation" includes any interest in any contract, transaction or other financial relationship with the corporation, and any interest in an entity whose best interests may be impaired by the best interests of the corporation including, without limitation, an entity providing any goods or services

to or receiving any goods or services from the corporation, an entity in which the corporation has any business or financial interest, and an entity providing goods or services or performing activities similar to the goods or services or activities of the corporation.

(b) Disclosure. If a responsible person is aware that the corporation is about to enter into any transaction or make any decision involving a conflict of interest, (a "conflicting interest transaction"), such person shall: (i) immediately inform those charged with approving the conflicting interest transaction on behalf of the corporation of the interest or position of such person or any part related to such person; (ii) aid the persons charged with making the decision by disclosing any material facts within the responsible person's knowledge that bear on the advisability of the corporation entering into the conflicting interest transaction; and (iii) not be entitled to vote on the decision to enter into such transaction.

(c) Approval of Conflicting Interest Transactions. The corporation may enter into a conflicting interest transaction provided either:

(i) The material facts as to the responsible person's relationship or interest and as to the conflicting interest transaction are disclosed or are known to the board of directors or to a committee of the board of directors that authorizes, approves or ratifies the conflicting interest transaction, and the board or committee in good faith authorizes, approves or ratifies the conflicting interest transaction by the affirmative vote of a majority of the disinterested directors on the board or committee, even though the disinterested directors are less than a quorum; or

(ii) The material facts as to the responsible person’s relationship or

interest and as to the conflicting interest transaction are disclosed or are known to the members, and the conflicting interest transaction is specifically authorized, approved, or ratified in good faith by a vote of the members entitled to vote thereon; or

(iii) The conflicting interest transaction is fair as to the corporation.

Section 4. Liability of Directors for Unlawful Distributions.

(a) Liability to Corporation. A director who votes for or assents to a distribution made in violation of law or the articles of incorporation of the corporation shall be personally liable to the corporation for the amount of the distribution that exceeds what could have been distributed without violating the law or the articles of incorporation if it is established that the director did not perform the director's duties in compliance with the general standards of conduct for directors set forth herein.

(b) Contribution. A director who is liable under Section 4 for an unlawful distribution is entitled to contribution: (i) from every other director who could be liable under Section 4 for the unlawful distribution; and (ii) from each person who accepted the distribution knowing the distribution was made in violation of law or the articles of incorporation, to the extent the distribution to that person exceeds what could have been distributed to that person without violating the laws of the state of or the articles of incorporation.

Section 5. Loans to Directors and Officers Prohibited. No loans shall be made by the corporation to any of its directors or officers. Any director or officer who assents to or participates in the making of any such loan shall be liable to the corporation for the amount of such loan until the repayment thereof.

ARTICLE VIII. CONTRACTS, CHECKS, DEPOSITS AND FUNDS

Section 1. Contracts. The Board of Directors may authorize any officer(s) or agent(s) of the corporation, to enter into any contract or execute and deliver any instrument in the name of and on behalf of the Corporation, and such authority may be general or confined to specific instances. Section 2. Checks, Drafts, etc. All checks, drafts or orders for the payment of money, notes or other evidences of indebtedness issued in the name of the corporation, shall be signed by such officer(s), agent(s) of the corporation in such manner as shall from time to time be determined by resolution of the Board of Directors. No such instrument shall be issued or presented for payment by the corporation in an amount greater than five hundred dollars ($500) unless it bears the signature of at least one officer and one other officer or director. Section 3. Expenditures. All unbudgeted expenditures in an amount greater than one hundred dollars ($100) shall be approved by the Board prior to payment. Section 4. Deposits. All funds of the corporation shall be deposited solely to the credit of the corporation in such banks, trust companies or other depositories as the Board of Directors may select.

ARTICLE IX.

COMMITTEES Section 1. Committees. The Board of Directors may establish such committees as it deems necessary to carry out the duties of the Board. The members of each committee shall be appointed by the President and approved by the Board of Directors. The Board of Directors shall by resolution provide for the rules of operation for each committee established.

ARTICLE X. DISTRIBUTION OF ASSETS UPON DISSOLUTION

Section 1. Distribution of Assets Upon Dissolution of the Corporation. Upon dissolution of the corporation, any remaining assets shall be distributed in the following order: (i) to pay the debts of the corporation, including interest as necessary; (ii) to one or more organizations recognized as tax-exempt within the meaning of Section 501 (c)(3) of the Internal Revenue Code, or the corresponding section of any future federal tax code (iii) to the members of 123

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Flying Club, Inc. pursuant to the laws of the State of _____________, and the appropriate sections of the Internal Revenue Code or the corresponding section of any future federal tax code. Any such assets not so distributed shall be disposed of by a Court of Competent Jurisdiction of the county in which the principal office of the corporation is then located, exclusively for such purposes or to such organization(s) as said Court shall determine, which are organized and operated exclusively for such purposes.

CERTIFICATE OF BYLAWS I hereby certify that the foregoing Bylaws, were adopted by the Board of Directors on this ____________________day of _________________________, 20_______________. ___________________________________ Secretary ___________________________________ Print Name of Secretary

Page 1 of 4

SS-4418 (01/13)

Business Services Division Tre Hargett, Secretary of State

State of Tennessee

INSTRUCTIONS

CHARTER NONPROFIT CORPORATION

Filing Fee: $100

A Nonprofit Corporation Charter may be filed using one of the following methods: • E-file: Go to http://tnbear.tn.gov/NewBiz and use the online tool to complete the charter and pay the filing fee by

credit card or debit card. When paying by credit card or debit card, there is a convenience fee that covers the credit card fees and transaction costs incurred by the Business Services Division when accepting online payments. Applicants who do not wish to pay the convenience fee to file online may choose the “Print and Mail” option at no additional cost.

• Print and Mail: Go to http://tnbear.tn.gov/NewBiz and use the online tool to complete the charter. Print and mail the charter along with the required filing fee to the Secretary of State’s office at 6th FL – Snodgrass Tower ATTN: Corporate Filing, 312 Rosa L. Parks AVE, Nashville, TN 37243.

• Paper submission: A blank charter may be obtained by going to http://www.tn.gov/sos/forms/ss-4418.pdf, by emailing the Secretary of State at [email protected], or by calling (615) 741-2286. The charter is hand printed in ink or computer generated and mailed along with the required filing fee to the Secretary of State’s office at 6th FL – Snodgrass Tower ATTN: Corporate Filing, 312 Rosa L. Parks AVE, Nashville, TN 37243.

• Walk-in: A blank charter form may be obtained in person at the Secretary of State Business Services Division

located at 6th FL – Snodgrass Tower, 312 Rosa L. Parks AVE, Nashville, TN 37243. A Nonprofit Corporation Charter must be accurately completed in its entirety. Forms that are inaccurate, incomplete or illegible will be rejected. A Nonprofit Corporation Charter sets forth the items required under T.C.A. §48-52-102.

CHARTER

1. The name of the corporation is - Enter the proposed name of the corporation. The name of a new corporation

must meet the requirements of T.C.A. §48-54-101.

If a corporation’s name contains the word “mortgage”, “bank”, “banks”, “banking”, “credit union” or “trust”, written approval must first be obtained from the Tennessee Department of Financial Institutions before documents can be accepted for filing with the Division of Business Services.

http://tnbear.tn.gov/NewBiz

http://tnbear.tn.gov/NewBiz

http://www.tn.gov/sos/forms/ss-4418.pdf

mailto:[email protected]

Page 2 of 4

If a corporation’s name contains the phrase “insurance company”, written approval must first be obtained from the Tennessee Department of Commerce & Insurance before documents can be accepted for filing with the Division of Business Services.

2. Name Consent: (Written Consent for Use of Indistinguishable Name) – An applicant corporation can request to use a name that is not distinguishable from the name used by an existing business under certain circumstances detailed in T.C.A. §48-54-101(c). Indicate name consent by checking. If checked, the charter must be accompanied by an application to use an indistinguishable name, accompanied by payment of an additional $20 filing fee. The application must set forth the appropriate criteria for name duplication as described in the Act.

3. This company has the additional designation of – If applicable to the specific nature of the corporation, enter any additional designation, including:

• Bank • Captive Insurance Company • Credit Union • Insurance Company • Massachusetts Trust • Mortgage Lender/Loan Broker • School Support Organization • Trust

4. The name and complete address of its initial registered agent and office located in the state of Tennessee

is – Enter the name of the corporation’s initial registered agent, the street address, city, state and zip code of the corporation’s initial registered office located in Tennessee and the county in which the office is located. The address will be verified and formatted to United States Postal Service address deliverability guidelines. If the address cannot be recognized as deliverable by the United States Postal Service, the form will be rejected by the Division of Business Services. A post office box is not acceptable for the registered agent/office address.

5. Fiscal Year Close Month – Enter the month of the year that concludes the corporation’s fiscal year. If a fiscal year close month is not indicated, the Division of Business Services will list the fiscal year close month as December by default. Please note that T.C.A. §48-66-203 requires corporations to file an annual report with the Secretary of State on or before the first day of the fourth month following the end of the close of the corporation’s fiscal year. Period of Duration if not perpetual – Indicate if the duration of the corporation is perpetual or has a specific end date by checking the appropriate box. If “other” is checked, indicate the specific date on which the duration of the corporation’s existence will end.

6. If the document is not to be effective upon filing by the Secretary of State, the delayed effective date and time is – If the existence of the corporation is to begin upon a future date, enter the future date. In no event can the future date or the actual occurrence of the specific event be more than ninety calendar days from the filing of the charter.

7. The corporation is not for profit – By signing the charter the filer acknowledges this statement to be true.

8. Please complete all of the following sentences by checking one of the two boxes in each sentence – By checking the appropriate boxes, indicate whether the corporation

• Is a public benefit corporation or a mutual benefit corporation. • Is a religious corporation or is not a religious corporation. • Has members or does not have members.

9. The complete address of its principal executive office is – Enter the street address, city, state and zip code of

the principal executive office of the corporation and the county in which the office is located. The address will be verified and formatted to United States Postal Service address deliverability guidelines. If the address cannot be recognized as deliverable by the United States Postal Service, the form will be rejected by the Division of Business Services. A post office box is not acceptable for the principal office address.

Page 3 of 4

10. The complete mailing address of the entity (if different from the principal office) is – If notifications from the

Division of Business Services should be sent to an address other than the principal office address, enter that address. The address will be verified and formatted to United States Postal Service address deliverability guidelines. If the address cannot be recognized as deliverable by the United States Postal Service, the form will be rejected by the Division of Business Services. A post office box address is acceptable for a mailing address.

11. List the name and complete address of each incorporator – Addresses should include street address, city, state and zip code. The signer of the charter must be an incorporator listed in this section.

12. School Organization – If “School Organization – Exempt” is indicated in section 3, check the box stating that “I certify that pursuant to T.C.A. §49-2-611, this nonprofit corporation is exempt from the $100 filing fee required by §48-51-303(a)(1)”. In addition, check the one of the remaining two boxes that pertains to this nonprofit corporation.

• This nonprofit corporation is a “school support organization “ as defined in T.C.A. §49-2-603(4)(A) – Check this box if the nonprofit corporation is a booster club, foundation, parent teacher association, parent teacher organization, parent teacher support association, or any other nongovernmental organization or group of persons whose primary purpose is to support a school district, school, school club, or academic, arts, athletic or social activities related to a school, that collects or receives money, materials, property or securities from students, parents, or members of the general public.

• This nonprofit corporation is an educational institution as defined in T.C.A. §48-101-502(b) – Check

this box if this nonprofit corporation is an organization organized and operated exclusively for educational purposes and which normally maintains a regular faculty and curriculum and normally has a regularly enrolled body of pupils or students in attendance at the place where its educational activities are regularly carried on, and which is accredited by a recognized accrediting agency. Included in this definition are organizations composed of parents of students and other persons connected with the institution, which are organized and operated for the purpose of conducting activities in support of the operations or extracurricular activities of such institutions. “Educational institution” also includes private foundations soliciting contributions exclusively for such organizations.

13. Insert here the provisions regarding the distribution of assets upon dissolution - Enter the corporation’s

provisions regarding the distribution of its assets upon its dissolution.

14. Other Provisions – Including any further information in this space is strictly optional. Use this section to set forth other details of the corporation that are not required to be included in the charter. Such items could include the initial board of directors, the business purpose of the corporation, the names of corporate management, and provisions regulating the powers and rights of the corporation, its board of directors and its shareholders.

SIGNATURE

• The person executing the document must sign it and indicate the date of signature in the appropriate spaces.

The signer must be an incorporator listed in Section 11 of the charter. Failure to sign and date the application will result in the application being rejected.

• Type or Print Name. Failure to type or print the signature name and title of the signer will result in the application being rejected.

FILING FEE

• The filing fee for a charter is $100.

• Make check, cashier’s check or money order payable to the Tennessee Secretary of State. Cash is only accepted for walk-in filings. Charters submitted without the proper filing fee will be rejected. Checks,

Page 4 of 4

cashier’s checks or money orders made out to any payee other than the Tennessee Secretary of State will not be accepted and will result in the rejection of document.


Business Services DivisionTre Hargett, Secretary of State

State of Tennessee312 Rosa L. Parks AVE, 6th Fl.

Nashville, TN 37243-1102(615) 741-2286

Filing Fee: $100.00

For Office Use Only

Page 1 of 2

The undersigned, acting as incorporator(s) of a nonprofit corporation under the provisions of the Tennessee Nonprofit Corporation Act, adopt the following Articles of Incorporation.

1. The name of the corporation is:

2. Name Consent: (Written Consent for Use of Indistinguishable Name) This entity name already exists in Tennessee and has received name consent from the existing entity.

3. This company has the additional designation of:

4. The name and complete address of the initial registered agent and office located in the state of Tennessee is:Name: Address: City: State: TN Zip Code: County:

5. Fiscal Year Close Month: Period of Duration: Perpetual Other

6. If the document is not to be effective upon filing by the Secretary of State, the delayed effective date and time is: (Not to exceed 90 days) Time:

7. The corporation is not for profit.

8. Please complete all of the following sentences by checking one of the two boxes in each sentence:This corporation is a public benefit corporation / mutual benefit corporation.This corporation is a religious corporation / not a religious corporation.This corporation will have members / not have members.

9. The complete address of its principal executive office is:Address: City: State: Zip Code: County:

*Note: Pursuant to T.C.A. §10-7-503 all information on this form is public record.

/ / Month Day Year

Effective Date: / / Month Day Year

Submitter Information: Name: Phone #: ( )

SS-4418 (Rev. 01/13) RDA 1678

(ss-4418)


Business Services DivisionTre Hargett, Secretary of State

State of Tennessee312 Rosa L. Parks AVE, 6th Fl.

Nashville, TN 37243-1102(615) 741-2286

Filing Fee: $100.00

For Office Use Only

Page 2 of 2

The name of the corporation is:

10. The complete mailing address of the entity (if different from the principal office) is: Address: City: State: Zip Code:

11. List the name and complete address of each incorporator:

12. School Organization: (required if the additional designation of “School Organization - Exempt” is entered in section 3.) I certify that pursuant to T.C.A. §49-2-611, this nonprofit corporation is exempt from the $100 filing fee required by

§48-51-303(a)(1). This nonprofit corporation is a “school support organization” as defined in T.C.A §49-2-603(4)(A). This nonprofit corporation is an educational institution as defined in T.C.A. §48-101-502(b).

13. Insert here the provisions regarding the distribution of assets upon dissolution:

14. Other Provisions:

*Note: Pursuant to T.C.A. §10-7-503 all information on this form is public record.

Signature Date Incorporator’s Signature

Incorporator’s Name (printed or typed)

Name Business Address City, State, Zip

(SS-4418)

SS-4418 (Rev. 1/13) RDA 1678

RELEASE, WAIVER OF LIABILITY AND HOLD HARMLESS AGREEMENT

The undersigned hereby agrees to release, waive, discharge, indemnify and hold harmless, Club 123, Inc., (the “Club”) its officers, servants, agents and employees (the "releasees") from any and all liability, claims, demands, actions and causes of action whatsoever arising out of or relating to any loss, damage or injury, including death, that may be sustained by the undersigned, or to any property belonging to the undersigned, whether caused by the negligence of the releasees, or otherwise, while participating in Club activities or while in, on or upon the premises where said Club activities are, have been or will be conducted; while in transit to or from the premises; or in any place or places connected with Club activities. “Club activities” as used herein, is defined as any lawful activities conducted by Club 123, Inc. pursuant to its organizing documents, amended organizing documents, bylaws, operational documents and any appropriate laws, rules and regulations promulgated by any federal, state or local governmental body.

The undersigned acknowledges that he/she is aware of risks and hazards connected with Club activities, and is fully aware there may be risks and hazards unknown to the undersigned connected with being on the premises and participating in Club activities, and hereby elects to voluntarily participate in Club activities, to enter upon the premises where Club activities are or have been conducted, and to engage in activities knowing that conditions may be hazardous, or may become hazardous or dangerous to the undersigned or the undersigned’s property. The undersigned voluntarily assume full responsibility for any risks of loss, property damage or personal injury, including death, that may be sustained by the undersigned, or any loss or damage to property owned by the undersigned, as a result of being a participant in Club activities, whether caused by the negligence of releasees or otherwise.

It is the express intent of the undersigned that this Release shall bind the members of the undersigned’s family and spouse, heirs, assigns and personal representative(s).

In signing this Release, the undersigned acknowledges and represents that:

1. He/she has read the foregoing Release, understands it, and signs it voluntarily;

2. No oral representation, statements or inducements, apart from this Release, have been made;

3. He/she is at least eighteen (18) years of age and fully competent.

Signature: _____________________________________

Print Name: ___________________________________________

Date: ________________________________

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