Re: Incorporation STUPID MOVE
John M. Ballenger (ballengerj@COMPUSERVE.COM)
Sun, 23 Aug 1998 17:53:50 -0400
>> WHEN YOU INCORPORATE A BSA UNIT YOU LOSE LIABILITY PROTECTION!
You lose this protection in several ways.
1. You are no longer a non-profit as such you do not avail yourself
of the immunity statutes in each state for volunteers.<<
A corporation can be a non-profit (or a non-stock) corporation. The
Little League recommends forming non-profits corporation, so why is it su=
a bad idea for Scouting? I am not necessarily an advocate for
incorporating Troops, I am just trying to understand the pros and cons.
Are you certain that forming a non-profit corporation prevents the
member volunteers from availing themselves of the immunity statutes in ea=
states for volunteers?
>>2. You are no longer a member of the BSA as such there is an issue=
as to whether you have the protection of their insurance policy.<<
Why are you no longer a member of the BSA if you incorporate? Are you
certain that incorporation as a non-profit corporation prevents the membe=
from being covered by the BSA insurance policy?
>>3. You are no longer protected under any policy of the CO. You ar=
no longer non-profit here also.<<
If the corporation is a not-for-profit corporation, would the members
be protected under the policy of the CO? Your remarks seem to be
addressed toward for-profit corporations. Is there a distinction here
between for-profit and not-for-profit corporations?
>>Even if you form a non-profit corporation for the unit or the committee=
you then lose all protection from the BSA and the CO.<<
Why would a non-profit corporation lose all protection from the BSA and
>>You also then come under the scrutiny of the IRS and any state taxing
unit. As a corporation you must get a tax id number. If you are
non-profit, you have to qualify as such under the IRS regulations. If th=
do not approve you, any money or gifts in kind given to the unit are not
tax deductible by the donee.<<
You are certainly correct here, but wouldn't a Boy Scout Troop qualify
for Section 501(c) status?
>>If you are for profit, you cannot accept gifts or money donations. You=
will also become a liability to the CO.<<
I agree here. It would be insanity to be a for-profit corporation.
>>Speaking of this, how can a CO, adopt another corporation and sponsor a=
BSA unit. Legally the board of directors of the CO would have to have 10=
(or at least majority in some states) ownership and control of the unit f=
one non-profit to own another corporation. If not, you my mess up the
non-profit tax status of the CO.<<
Doesn't the CO already have 100% ownership and control of the unit? =
Aren't all the Committee Members and Scoutmasters approved by the CO
and theoretically under the control and supervision of the CO?
OTOH, the prospect of unnecessary duplication may be a factor to consider=
For example, if the CO is already a section 501 non-profit corporation,
then there would seem to be little reason for the Troop to form another
corporation. However, in the business community it is not unusual to hav=
two or more corporate layer under the theory that there will be greater
insulation from liability.
Our CO is a church. The Virginia Constitution prohibits the General
Assembly of Virginia from granting a charter of incorporation to any chur=
or religious denomination. However, that prohibition has been held not t=
apply to church agencies essential to the accomplishment of church work,
e.g., American Baptist Home Missionary Society.
Under Virginia law, a church is entitled to limited immunity from
liability for torts inflicted on beneficiaries of the institution, but it=
does not have total immunity. Also, under the Virginia Code, no member o=
a church will be liable in tort for the actions of any officer, employee,=
leader or other member of a church solely because of his membership in it=
I am not certain what type of immunity a the members of a Boy Scout Troop=
sponsored by a church would have.
There is also an immunity statute in Virginia for the directors, trustees=
and officers or organizations exempt from income taxation under Section 5=
of the Internal Revenue Code who serve without compensation for civil
liability. There are, as always, exceptions. There is liability for
willful misconduct, a knowing violation of criminal law or negligent
operation of a motor vehicle. This civil immunity applies whether the
organization is incorporated or not, and depends on the tax exempt status=
of the organization.
>>Actual expose of a member of the committee is limited. Remember what
is reported on the TV on in the newspaper has nothing to do with real
trials and real law.<<
If the Troop is an unincorporated association, then aren't all members of=
the association legally responsible for the actions of all other members =
the association (if acting on behalf of the association)? Isn't there
total cross-liabilty, just like in a partnership? I see in a separate
reply to another post you have said that an unincorporated association is=
not like a partnership, but I remain concerned about the issue of joint a=
>>The committee member would have to vote with the rest of the committee
to force the unit leader or some other adult to do something that would
place a kid or kids in danger. If requires affirmative acts knowing such=
acts created the danger. Sending a kid to Philmont in a car, knowing the=
could be a car accident is not enough. Sending a kid to Philmont in a ca=
with a person who is a know alcoholic and who is drunk at the time gets y=
Is this a matter of general law of unincorporated associations? This
sounds like the kind of protection that is only available with a
corporation, and not with an unincorporated association?
>>Since all adult unit leaders act as volunteers to the CO's Scouting
program, they would be covered by the CO's corporate umbrella.<<
I agree, and that is good, but couldn't a Scout Troop organized as
a non-profit corporation be added as a named insured on the CO's policy?
>>WRONG!. The new corporation would have to purchase a new insurance
policy. One corporation's insurance policy cannot cover another
corporation's liability. One not incorporated business insurance policy
not cover an incorporated business's policy. This would be like saying
your homeowner's insurance policy cover's your neighbor's house.<<
I am not sure I agree with this. For example, most commercial leases
require that tenants obtain insurance policies naming the landlord as an
additional insured on the tenant's policy. In that case, there are
separate corporations involved.
>>The only liability insurance policy that would cover the unit would be
one they purchase. Minimum premium for a $1,000,000 policy would be at
least $750.00 per year. That policy would no doubt have a deductible. of=
5-10 thousand dollars.<<
Our Troop already has a policy, and we are required to show it to each ca=
we visit. At the top of the policy it says "Boy Scouts of America
Scouting Accident Insurance." How would that change if the Troop were a
non-profit corporation instead of an unincorporated association? Is Mutu=
of Omaha going to refuse to write the policy?
John M. Ballenger
Terry Howerton Sakima Group, Inc. SCOUTER Magazine Kansas City