Legal Requirements for CEC Units and Divisions
Legal Requirements for CEC Units and Divisions
Arthur L. Herold
Webster, Chamberlain & Bean, LLP
1747 Pennsylvania Avenue, NW, Suite 1000
Washington, DC 20006
202-785-9500
I. INTRODUCTION
A. Two Areas of Law
1. General Corporate – Organization
2. Tax
B. Questions Throughout
II. GENERAL CORPORATE
A. Structure
1. Type of Organization
a. Corporation – limits liability
b. Unincorporated Entity – potential for unlimited liability
i. Contract (e.g., hotel)
ii. Tort (e.g., slip and fall)
2. Articles of Incorporation
a. Organizational document
b. Filed with Secretary of State
c. If name changes, this document needs to be formally amended andamendment filed with state
3. Registered Agent
4. Annual Report – lists officers and directors
B. Bylaws
1. Governing document
2. Rights of Members, Voting, Elections
3. Indemnification
C. Minutes
1. Not “Hours”
2. Enough detail to show due care, deliberation
D. Record Retention – Transition of Records
E. Responsibilities of Officers and Directors – “Fiduciary Duty”
1. Duty of Care – Ordinarily prudent person in like circumstances
a. Attend meetings
b. Review materials
2. Duty of Loyalty
a. Confidentiality
b. Conflicts of interest
F. Insurance
1. Directors and Officers (D&O)
2. General Commercial
a. Personal injury
b. Property damage
G. Contracts
1. Hotel contracts
a. Attrition and cancellation
b. Force majeure
c. Liquor liability
H. Trademarks
1. Use CEC marks
I. Sarbanes-Oxley
1. Whistleblower Policy
2. Record retention – cease destruction of records relevant to pending litigation or investigation (e.g., Enron)
III. TAX
A. EIN – Form SS-4
B. Exemption
1. §501(c)(3) – charitable, educational, scientific or religious
2. IRS Form 1023
3. Determination letter from IRS
4. Application and related correspondence must be made available upon request.
C. Annual Returns
1. IRS Form 990
a. Essentially a financial statement, together with other information about an organization’s activities to enable IRS to ascertain that theorganization continues to qualify for exemption.
b. Which form to file
i. Form 990-N – Beginning in 2008, all exempt organizations, even the smallest ones, have to file some return. If gross receipts normally are less than $50,000, can file the electronic postcard Form 990-N.
“Normal” – 3-year average
“Gross receipts” – all revenue from all sources, before deducting any costs or expenses
ii. If less than $200,000 in gross receipts, can file the Form 990EZ which is a simple 4-page form that does not ask fornearly as much information as the full Form 990. Also have to have less than $500,000 in total assets in order to filethe Form 990-EZ.
iii. If greater than $200,000 in gross receipts or greater than $500,000 in total assets, must file the full Form 990. Full Form990 asks all of the financial information from the Form990-EZ, plus additional operational and governance questions.
iv. Form 990-T for any UBIT (e.g., advertising income)
c. Failure to file
i. Return must be filed by 4 ½ months following the end of theorganization’s fiscal year.
ii. Failure to file a return for 3 consecutive years results in loss ofexemption and have to file a Form 1023 to formally apply.
iii. Monetary penalties for failure to file Form 990 and Form990-EZ.
d. Must be provided to anyone who requests for 3 years after return isfiled.
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