by Jen Angel
Legal vs. Illegal / Underground vs. Above Ground
If you are an underground (technically illegal) space, you run the risk of getting shut down. This is a bad thing. However, if you become completely legal, you have to deal with legal bs and taxes daily. So you pick the lesser of two evils. If you want to be legal, you must have two or three people who are willing to devote a huge amount of time into researching it and understanding it.
Considerations Before Getting a Space:
Before you open a space, it is recommended (by me and others) that you know how you are going to support yourself for at least a year from opening.
Don’t count on having punk shows every week, because remember, it’s the same crowd that goes to shows usually and they can’t afford to support the space themselves, plus the crowd will probably get smaller ad the number of shows increases. Also, you can’t always ask bands to play for free, and some shows may not make the money you expect them too.
Fundraising ideas include yearly memberships (explained more below), potlucks, sponsorship from other businesses, garage sales, renting the space for people to meet or bands to practice, whatever you can think of.
You will need to check with your local, county, state, and federal offices to see if there would be any special licensing requirements to open a “community center.” The best thing you can do is call your local city hall, and ask them if they have information on licensing for new businesses. Ohio has a “One Stop Business Permit Center” and they will send you a complete information packet. You should ask the local person (city hall) where to find out about state and federal licensing.
You will need a business license only if you will be selling things on a large scale. If you’re only selling a few records, it would be easier to do it through one person and have them get a “vendors license” every year. If you want a “store,” then you’re going to have to look up business licenses. You can get the Vendors license from the county auditor’s office.
The best thing to do is to go to the business license division of your city hall and they’ll tell you what you need to do. You’ll need to get a tax permit (approximately $100 deposit) for State taxes from the Department of Taxation, and you’ll need to get a fictitious name on file so you can do things under the name of your organization (like set up a bank account). The business license division can tell you about this.
You might also try talking to the city auditor’s office.
It is a bad idea to sell food. You can have potlucks or whatever at your space, but don’t try to sell food in a store environment or for profit, because then you will have to get into all of this legal / health inspection crap that it’s better not to deal with right away.
You know how Gilman Street has a members only policy? Membership can be free, or a dollar a year, or two dollars a year or whatever. The way they do it is that all audience members need a membership card, which is purchased for a dollar, which they pay in addition to the door price at the first show. So, the show would be $5 members $6 non-members, and then you’re a member after that, as long as you show your card. They have a “no mercy” policy. So if you’re only in town for one show, or you forget your card, or whatever, you still have to pay the non-member price.
On the back of the card, it says:
This card is proof of membership at 924 Gilman Street. Membership is required for admission to all events. Members agree to follow all rules of the club including no drinking, drug use, or vandalism in or around the club, and no stagediving or excessively violent dancing during the show. Membership is yearly and non-transferable. 924 Gilman Street is based on the fact hat bands, audience, and the staff is all equally important to the success of a show, and this card is warranted to the role of the audience. This is your club.
Advantages to this members-only stuff are that you are now a PRIVATE club and not a PUBLIC one, and you aren’t subject to the same laws, like liability laws. If you want, you can make members sign a “waiver” type form saying they enter at their own risk and your group is not responsible for any injuries or lost or stolen belongings, etc.
It is best not to allow alcohol within the space. it’s not for straightedge reasons, it just creates too many legal problems.
Building Stuff In General
Make sure the area that you are in has no noise ordinances, and no neighbors that are right next to or above the space to complain.
When you lease the place, look over the lease, and have a lawyer look at it, just to make sure that you know everything that is in there so you won’t get screwed over. If you have gotten a fictitious name thing, use the name on the lease. if you don’t, make sure that there is more than one name on the lease so that one person isn’t held responsible for rent or any damages.
You will be expected to pay first and last month’s rent, and maybe a security deposit. You will probably sign a lease that lasts for at least a year. If you break the lease, you lose the deposit and last month’s rent. all buildings need to adhere to fire codes and need to have the right number of bathrooms and exits and all that crap. You can call the “code enforcement” division of city hall (or the fire department)? if you need to take care of this. Usually the landlord has some of this information. You will also need to contact the city’s Fire Marshall’s office, inspection division to find out the legal capacity of the room.
Try to obtain a copy of the fire code from either of these places and adhere to it strictly.
You want to make sure that the building is structurally sound and also has the electrical capability to support a lot of equipment (like a sound system). And also adequate plumbing.
Liability insurance, which protects you from getting sued, can be around $500 or so each year. You may need to look into getting permits for gatherings or for amplified sound.
You may also need to get into Premise, fire and casualty insurance, depending on what kind of lease you have and what the landlord wants you to get.
the best thing to do would be to try and contact an accountant to help you with taxes. it’s very confusing and I’m sure there other things that I am forgetting that you will need. You can ask the law, accounting, and business departments of local universities, ask if anyone knows an accountant as a friend or relative, or at last resort, you a call people out of the yellow pages, though i don’t know how much it will cost you or if you can convince anyone to give you some free advice. You will need to get a tax number regardless of whether or not you are non-profit. This will allow you to buy wholesale things that are only available to businesses and not individuals.
You don’t have to worry about anything that has to do with employees, because, hopefully, you are going to be run by volunteers and it won’t be an issue.
Most cities do not have any tax or laws on what you can charge for admission to events/shows.
Columbus, for example, has a 2% tax on profit (city tax). However, if you’re non-profit, you won’t need to worry about this. Federal “income” tax, you usually have to pay this if you are a business. However, if you make a certain amount of money each year (it’s a lot) you don’t have to file. But you should check into this and get the details. Federal Tax Assistance: 1-800-829-1040
The important thing when dealing with taxes is to keep records. Extensive records. Get a receipt for everything and keep it.
Corporation vs. Association vs. Private Ownership vs. Cooperative vs. Non Profit
A corporation has limited liability, meaning the individual members that make up the corporation can’t be sued, or have their personal assets attached. This is good, in case some stupid person sues you for breaking their arm in a pit or something. However, it also means that you are not taking responsibility for your actions, which is the way a lot of the multinational corporations that we political people dislike operate. In essence, Incorporation is simply the creation of a fictitious person, the corporation, which the law will then recognize as if it was a real person. The advantage is that the real individuals (you and your comrades) who create the corporation are not liable for the debts and tortious acts incurred by your creation except to the extent of your investment. Thus, if you formed a partnership, say, or a cooperative, each of you would be liable for the full amount of any debts run up and could be sued, have your assets attached, etc. But if you form a corporation and it goes belly up, you can walk away. A non-profit corp is registered differently than a for-profit corp. However, just because the state recognized it as a non-profit doesn’t mean the Feds do, that is a separate filing. If you go the corp route you almost certainly want to define yourselves as educational and to make it clear in your incorporation papers that you are nonpartisan (political organs are generally nonprofit but no deductible). In general, it is better to have a broad corporate charter so that you can branch out and develop your programs. You can’t do anything not specified (at least in general terms) in your charter, but you don’t have to do everything it calls for.
An association does NOT have limited liability, and individual members can be sued. This is called strict liability. Incorporation is done on the state level with the secretary of state. You will also automatically be given a franchise tax number. You need that for state taxes.
The best way to find out about how to become a non-profit organization in the eyes of the law is to go to an organization that you know which is already non-profit, and ask them how they did it. This can include community organizations, environmental groups, and food co-ops, for example.
STORES cannot be non-profit, essentially. This means, If you become a non-profit organization, you must make sure that you make the GROUP a non-profit org, and not the SPACE. This blanket/umbrella organization can fund or sponsor the store/space, but cannot be a store, because it’s too much of a profit-minded business and you won’t get the status. Also, in case the space fails, you, the entity that drives this space, your org, will still survive and still maintain non-profit status.
To become a non-profit organization, you must first incorporate. The filing fee for the 501c3 form is approx. $435, depending. The application number is 1023. You can get it from the IRS (look in the phone book) with an instruction booklet. Filing is difficult and the process can take months. You can file yourself, and when asked for a charter, by laws, or constitution, instead of writing your own you can contact an organization that you agree with and ask for copies of theirs. If you change some of the words and some parts, you soon have your own. I have a couple of copies of this type of thing from various organizations.
There are two types of non-profit status, and the one most often thought of is the “tax exempt status.” This includes a bulk postage permit and makes donations to your organization tax deductible. It is difficult to get this and you must prove that you are in some way benefit the community through education or whatever, I don’t know exactly how it is worded. You also want to be sure that you are convincingly “non-partisan” i.e., you don’t promote one political ideology over another. There are some ways around this. You can “piggyback” on an organization, or use their tax number/postage permit number, though this is illegal. You can have a non-profit organization become your “fiscal sponsor.”
A Few Last Issues / Notes
If you don’t want street people or homeless people in your space, it is not a community center and does not call it one. Make it a private club/space for you and your friends.
For More Info
Check your local library. look up every subject you can think of that pertains to this and read ALL of the books. There are some good ones out there on grants, cooperatives, and even one that is called the California Non-Profit Handbook by Anthony Mancuso…Look for a book called WE OWN IT, it’s a guide to doing cooperatives and things and was written by an attorney. You can also look under the general law section (try 320’s and 340’s in the library) and see what you find. You can also ask a librarian.