ERA COLT Presentation ~ Thursday, November 8, 2018 Doubletree O’Hare – Rosemont 5460 N. River Road, Rosemont, IL 60018 CHAPTER LEGAL AND TAX MATTERS Discussion by ERA Legal Counsel Gerald M. Newman Schoenberg Finkel Newman & Rosenberg, LLC 222 S. Riverside Plaza, Suite 2100 Chicago, IL 60606 Telephone: 312/648-2300, Ext. 309 Cell:847/274-7920 Email: Gerald.Newman@SFNR.com nationalsalesrepattorneys.com

INCORPORATION AND LEGAL STRUCTURE TYPES OF CORPORATIONS Profit Not-for-Profit Tax Exempt REASONS FOR INCORPORATING Limited Liability Sophisticated form of Doing Business Perpetual Existence Facilitates Transfer of Responsibility and “Ownership”

OPERATING THE NOT-FOR-PROFIT CORPORATION Purpose, i.e., promoting the development, establishment or expansion of industries By-Laws Officers Number of Directors Responsibilities of Officers and Directors Meeting Requirements Elections Appointments

OPERATING THE NOT-FOR-PROFIT CORPORATION (cont’d.) Committees Voting Rights Members/Non-Members No Dividends Indemnification of Officers and Directors Office Lease Bank Account/Corporate Resolutions Employer Identification Number (“EIN”) Management Agreement/Contracts

MAINTAINING THE CORPORATION Annual Corporate Report Annual Filing Fee Annual Meetings Minutes/Preparation, Distribution and Approval Members, Board of Directors Election of Directors By Members By Directors Fiscal Responsibility Master Copy of Important Documents (To Pass from President to President)

BYLAWS Review of ERA National and Southwest Chapter Bylaws

INSURANCE Workman's Compensation - Protects Association against claims by employees Property Insurance - Protects against fire and theft Non-Owned Auto Directors and Officers Liability Show Liability No Show Insurance

VOLUNTEER PROTECTION ACT Limitation of Liability For negligent acts or omissions while acting within the scope of responsibility No insulation from: Liability for reckless, willful or criminal conduct, gross negligence, etc. Operation of motor vehicle, etc. requiring license Violent misconduct, hate crimes, civil rights, etc. Act does not eliminate the need for associations to maintain liability insurance.

TAX MATTERS Application for Income Tax Exemption Must not be formed or operated explicitly for profit 501(C)6 Business League 501(C)3 Charitable or Educational Purposes (ERA) No part of an exempt association’s assets or net earnings may inure to the benefit of any shareholder or individual. Can lose exemption for engaging in activities against public policy.

TAX MATTERS (cont’d.) Federal Income Tax Return - 990 (Exempt Organization) If gross receipts are less than $50,000, file form 990-N (electronic notice e-postcard) If gross receipts less than $200,000 and total assets less than $500,000, file Form 990-EZ – short form return of exempt organization File Form 990 if gross receipts greater than $200,000 and assets greater than $500,000, file complete 990 Form All of these are informational returns for the IRS. Penalty for failure to file is $20 per day, but not to exceed the lesser of $10,000 or 5% of gross receipts Form can be filed by the Chapter or by its Accountant State Income Tax Return (Exempt Organization)

TAX MATTERS (cont’d.) State or Federal Reporting Requirements 990T (unrelated business income) State Sales Tax - Chapters usually not exempt Unrelated Business Income is Taxable (“UBIT”) Potentially Taxable/Types of Activities Advertising Income/Advertising in periodicals, journals and magazines published by Chapter is unrelated business income. Other Membership Services Automobile Tires Telephone Services Group Insurance Sale of Mailing Lists Advise ERA Headquarters if unrelated business income exceeds $1,000.

TAX MATTERS (cont’d.) Record Keeping - (See ERA Tax Manual) Lobbying Expenses Copies of records to ERA Headquarters: Employer Identification Number (EIN) Federal Tax Exemption determination letter Annual income and expense statement or Audit Report Form 990N, 990EZ or 990 Form 990T (if filed)

SERVICE CORPORATION Corporate entity for taxable activities Insulates and protects corporation from losing tax exemption

ERA EXPERT ASSESS Legal Service Program SFNR offers ERA members complimentary 20-minute Expert Access Telephone Conference Members can confer with experienced attorneys on any rep issue, including: sales, mergers or acquisitions; contract drafting and negotiation; commission recovery measures; exit strategies; succession planning; employee contracts and non-competes; general legal, business and corporate matters.

Questions? Gerald M. Newman www.nationalsalesrepattorneys.com THANK YOU Questions? Gerald M. Newman www.nationalsalesrepattorneys.com