Corporations and your community association

Hi I’m Betsy Barbeau and this is Cam Matters come join us today as we talk About the exciting topic of Corporations And the difference between non-profit Not-for-profit and for-profit Come join us Welcome to cam matters condos co-ops HOAs and Beyond Betsy barbue is an information leader in Florida on Community Association living Rights and obligations she is an expert On the rights and obligations of owners As well as the association if you live Or are planning to live in the state of Florida there’s a good chance you’ll be Part of a Community Association and by The end of this show you’ll know a Little bit more about Community Associations and why they matter We’re so glad that you’re joining us for Another episode of Cam matters we’re Going to be talking about corporations And everything that comes along with That but first of all Betsy oh stop who Do I need to talk to about that that Black guy that you got there well I’ve told everybody today we had a Cai Luncheon and I told everybody today it’s The it’s left over from a really bad um Facelift except obviously I haven’t had A facelift so you better stop remember Um I’m a newlywed yeah Jim and I haven’t Figured out how to oh kiss while I’m Doing aerobics and if I’m if he’s trying

To leave home in the morning and I’m Doing aerobics and we crash that’s right Where his chin goes okay all right so I’m okay I’m okay I know we don’t have to talk about the Black eye anymore exactly I’m glad it Wasn’t like a community event that you Were you know trying to be part of or Something and things got out of hand you Know well it it almost could have been Last week’s meeting with a bunch of Homeowners explaining Amendments to their documents and one of Those Topics by the way was corporations It’s like honestly wow so that that Could be what that I could say that’s What that was from really didn’t like Anything I had to say So as we’re digging into corporations And that seems to be a sore spot with Them what is let’s talk about first how It applies to Community Living how is a Corporation like a community living it’s And vice versa Peace and poor Corporation besides the Fact that the legislators said that Developers have to create a corporation To manage and operate the Corp the Community And remember we have that three-fold Mission statement protect the property It’s value maintain the things that are Used in common and enforce the Restrictions on the owner’s use rights

So there’s a three four-fold mission Statement that the corporation has but Why why a corporation to begin with well I Don’t know all of the other legal Technical uh reasons but the to me the Main reason for a corporation is for Bargaining for Contracting for liability And instead of uh 245 owners in a Community signing the lawn contract You have an entity a corporation is a Legal entity it has very similar Standing as a person And so it can contract And it can have its own bank account it Can have its own tax ID number It the way corporations are set up is That the big group of people who have Something in common who want that Ability They organize themselves under their own State laws whatever those might be To incorporate and you’ll find just Dozens of Corporations if you just drive Down Main Street Dunston Plumbing buyers Funeral Home Macklin bernstead attorneys At law uh and then you’ve got the big Ones like SunTrust or United Southern Bank those are big corporations but a Lot of the local Service providers A lot of the local Vendors a lot of the local stores They’re all corporations it allows you To contract it just just imagine if you

Had a community with a couple hundred People Whose name is the utility bill going to Be in right you know you’re not going to Put talk about fights yes you’re not Going to put everybody in the Corporation in the community you’re not Going to put their name on the utility Bill think about Contracting for Insurance right you’re not going to have Every owner in that Community sign a Contract for insurance for the common Property nor would they want it that way No no so corporations give you the Ability to contract In some corporations there’s limited Liability to the members of that Corporation for debts of the corporation In our communities what we’ll find is That there is personal liability on the Board board of directors okay and we can Talk about that later but there is Personal liability there okay um and That Tails into the whole fiduciary uh Topic and I don’t know if we want to go There or not today we have a show on Fiduciary yeah let me make sure I’ve got The foundation lead so are you saying Basically like the owners are kind of Like the stockholders Sort of a little bit you could and and What I uh we’ll often call them instead Of stockholders because stockholders the The idea there is that they’re going to

Get a return on their investment and in Your community associations you’re not Get the corporation is not offering a Return on investment for the owners Hopefully the owners do have an increase In the proper their own individual Property values right but the purpose is Not For that the Oh so I’m going to call them Stakeholders okay or or even and in our Communities we call them members they’re Members of a corporation and in other Kinds of Corporations bigger ones like Truest or United Southern Bank the Stakeholders are stockholders and would Get a return on investment okay so You’ve talked about the benefits of Having you know this Corporation I mean There’s legal protection there’s just Basic organization what will possibly Would be the problem with the Corporation It’s a downside I I don’t know of a Downside okay I mean I don’t know how Else we would conduct business the way We need to without a corporation the the State of Florida gives corporations Whether they’re for-profit or not for Profit and We’ll probably do that in our maybe or After the break right we’ll talk about The differences between for-profit Not-for-profit and non-profit we can

Talk about that some of the issues Especially for this angry group of Owners was that the corporation is Allowed in Florida to to do pretty much Anything an individual can do they can Buy sell uh lend borrow Sue or be suit Sue or be sued right and For some reason the this group that I Was talking to they really objected to The phrase in the Articles of Incorporation of being able to buy Property And somehow they thought the board of Directors was just going to go out and Spend all of their money which they have None of None zero And was going to buy all this other Property and there was nothing I could Say that that Can I tell you a phrase I came up with Or yes please I don’t I don’t know that It’s actually mine I don’t think but Willful ignorance I I just don’t understand not Asking questions and wanting to learn Right right so they were making Assumptions that just weren’t true and They weren’t listening and they wouldn’t They would not listen no no I mean I was Not probably 10 minutes into a little q A session that we were getting that was Getting started and I finally said okay Stop

Do you want me here or not I don’t I Mean if you don’t want to talk about any Of this if you don’t want me to help Answer questions and tell you about all Of these amendments that your committee Has worked really hard to draft and and We’re just now introducing them to you And letting you have a q a but I don’t Understand the hostility I don’t Understand the anger if you don’t want Me here you don’t want any help you want Me to help explain what some of the Changes are going to be and why they’re Going to be changes I can go home I have Plenty to do at the office So it was just they didn’t like change For the sake of change probably because It’s been set up like this for a while I’m guessing yes the this community’s Documents and and I guess maybe the back Story here Um the community documents were written In 1978 and they literally were written Typed on a manual typewriter you can Tell that they were a manual time but You’re gonna say chiseled so I mean it’s Not that old but manual pretty old yeah And and uh they gathered a committee Together about three years ago to start Working on amendments and some Communities do that and and Hammer Through all of the what about what about What if what if whatever kinds of things Before they go to the attorney and it

Saves a lot of attorneys fees and this Committee has worked for almost three Years on these amendments yeah and met Even met during coven and they have Worked really really hard to update Their documents and they’ve been doing Them You know based on what the statutes Allow and they’ve been doing a really Good job with the Um just keep keeping as many things the Same as they can right but then bringing It into the 21st century right right and And taking advantage of the statutory Legislative changes that have come along Since 1978. a lot and they this Committee has saved the community so Much money and attorneys fees and in Another I don’t know a couple of months After they tweak them some more the Documents will be ready to go to the Attorney for the final approval and let Him or her tweak them but in the Meantime all of this hashing out stuff Has been done Basically at hardly any expense but one Of the things that was that the Developer put in the original documents Was that the Assessment the amount of money that each Each owner pays would only ever be three Hundred dollars a year That’s in writing only ever be only ever Be could never be any more than 300 a

Year they have been operating a Community with with 200 and I can’t remember now 200 and something 60 something Homes A clubhouse a swimming pool sidewalk Shuffleboard Court those kinds of things They’ve been operating that on three Hundred dollars Per person What do you do can you change that can Can it be they can yeah they can change It but the owners don’t want it changed And that is a tough situation and it It’s kind of like well have you looked At your utility bill lately right I mean They need a manager they don’t have a Manager sure everybody is a volunteer And The the I mean I don’t know how they they’ve Done it But the property of insurance is going To go way up they’ve got an estimate Right now about forty thousand dollar Repair to the pool and you know that’s Going to have scope creep And that that amount is going to go up So this was our first introduction and One of the things that they objected to Was why why are we a corporation why do We have to be and I said well you Already are right I’m I’m not making you One

It’s not the committee you already are And in Florida these are the powers that A Florida Corporation has well we don’t Want our board going out and buying Property I’m like Yeah that’s like the last thing on their List and besides You don’t have any money right and And then the other thing that they were Just Totally berserk about was the difference Between non-profit and not-for-profit Okay that sounds like something we need To dive into on the other side of the Break Hang on we’re going to be right Back okay Are you ready for a new career do you Have skills or interest in management Real estate construction maintenance Accounting strategic planning project Management budgets Human Resource Management lawn and landscaping Pool Services or any other expertise needed To operate a Community Association if You do Community Association Management Could be for you for more information Feel free to email Betsy at Betsy Floridacamschools.com or visit the Florida cam schools website at Www.floridacamschools.com Florida Community Association Management Continues to grow career opportunities Abound Welcome back to cam matters where today

We’re talking about corporations and Betsy we were just going to get into the The difference which is the first time It’s ever been brought to my attention There’s a difference between between Non-profit and not for profit are they Not the same thing yeah no no and people Mix them up and they don’t really know That there is a difference and again I’m The lady who’s picky with words and Well it sounds like there’s a reason For for test purposes for our for our Managers when they’re taking tests and Things Um there’s there is the Florida For-profit Corporation act which is uh Chapter 607 in in our Florida Statutes But we also have another statute that is Chapter 617 and it’s called the Florida Not-for-profit corporate Act And not for profit is not the same as Non-profit okay and people mix it up all The time non-profit is a charitable like The charitable 501c3 churches churches And Cancer Society you know whatever Those are good news jail and prison Ministry whatever those are that you can Make a contribution to and get a tax Deduction for you get a lot of Contribution statement at the end of the Year to give to your accountant our Communities are not non-profit they in In Florida I don’t know what other States have uh what kind of categories

They have but in Florida we have another Kind of corporation that the better name For it is common interest group common Interest Corporation and let me give you An example of a common interest Corporation I think a lot of us have had Or know of children or grandchildren in The high school band And the the high school band uniforms Are awful And the school never has any money to Buy new fan uniforms so the parents of The band kids organize themselves into a Band parent booster Corporation That is a not-for-profit corporation For the sole purpose common interest of Selling Cokes and hot dogs at the ball Games and raising money to buy band Uniforms Now that not-for-profit common interest Corporation Is not organized as a return on Investment for its stakeholders members Right stockholders it’s it’s not Organized for that it’s organized for a Common interest that Corporation also Has a board of directors just like ours Do the board of directors elects the Officers Which would be Um you might would call them Functionaries they have tasks they have Duties that help administer the defined Roles of the corporation like a

President vice president secretary Treasurer they don’t Particularly have any extra power they Just have extra duties on the board of Directors That band parents Corporation has a tax ID number now it can contract As a corporation it will open a bank Account if it is going to rent a tent to Sell hot dogs and cokes under it can now Contract as one entity instead of all The band parents haven’t signed a Contract right it can get the its own Event Insurance okay for the activities That it has maybe some tax benefits and No no no tax benefit tax no tax benefits No okay so non-profit has tax benefits But not for profit okay it does not Interesting no you still pay sales tax You still file a federal income tax Return it’s either an 1120 or an 1120 Age uh and you you may in Florida file a State corporate tax return 11 20. Um but that your accountant takes care Of that but no the not-for-profit has no Tax benefits whatsoever still pay sales Tax Um probably don’t earn enough income to Pay Income tax but you still file an income Tax return right but it still will Likely show zero the if you think about The the band parents they’ve organized

Themselves into a common interest Corporation they Sell Cokes and hot dogs at the ball Games and they use the money to buy band Uniforms it’s a common interest group We kind of do the same thing as a Community Association we organize Ourselves into a corporation we have a Board of directors and the board of Directors elects officers that’s the way Corporations work and this one little Community Their officers are a totally different Group of people they don’t they don’t They don’t understand how corporations Work but the big group of members elects The little leadership group and then the Little leadership group elects its Officers it’s functionaries The In our communities we pay money to Ourselves that’s how we raise our money We don’t sell Cokes and hot dogs instead We pay money to ourselves that’s our Assessment payment and we get the pool Cleaned and we get the yard mode and we Get the clubhouse insured right we are We are the same kind of organization as Those little band parents And it has no tax advantage at all okay Um it has no other IRS reporting Requirements It it just it’s annual tax return at the End of the year

That was a great example the whole band Thing just completely painted the Picture the difference I want to go back To the the group that was upset because It sounds like they were just made aware That they were a corporation but they Were afraid of the power that they were Learning that this Corporation legally Had have never used it they’ve never had Any reason to fear going out and buying Land but now all of a sudden you know They’ve always had the power right it Wasn’t it this is the first time Anybody’s actually read through their Documents right but they’ve always had The power to buy land so are you saying That every Um community Is a corporation like by law whether You’re in your way yes well in Florida In Florida every Community Association Whether you’re a condominium a Cooperative or a homeowner association Every Community is a Florida Corporation Most of them are organized under Chapters 617 the not-for-profit statute There are a few that are for-profit and That’s above my pay grade I don’t understand that but why they Would do that but or how that works but Most of them are not for profit and then We’re we’re also organized under a Second Statute and so we’re a corporation but

We’re A peculiar type of Corporation We’re a condominium Corporation or a Co-op Corporation or a Homeowner Association Corporation okay so we’re a Corporation but then we’re A peculiar Type of Corporation and then that tells Us the specific statutes that we’re Organized under Betsy I really Appreciate the fact that you use such Good examples I mean to be able to share Vulnerably about the difficult situation You had really brought to light that People aren’t reading when they’re Moving into community living situations Like they’re they’re not they’re not Aware and that could be really dangerous Um yeah and you know and I think I I Have to try to remember I feel like I Probably Um particularly blessed in that with Some other knowledge maybe that people Don’t have have because I my very first Job in the law office when I went to Work when I was 20 was the corporation Clerk Corporation secretary I have typed Articles of Incorporation and bylaws and Stockholders agreements and all those Kinds of minutes I have typed minutes Since I was 20 years old I still type Minutes the exact same way that they Taught me in the law office and so I I Don’t remember not knowing and Understanding that legal organizational Structure I don’t I don’t remember not

Knowing And so I’m I’m hoping that I can explain Simply enough to others Um so that they can understand The significance of it because if we Weren’t a corporation uh you you can’t Do business if you’re not a corporation Right you a great a group of people Needs to be a corporation Wow and that’s what we are what what a Mind-blowing episode thank you so much It’s very clear I went from oh boy Corporations this is That yeah I totally understand it Because you paint such a great picture Um Betsy just one more time let people Know how they can get a hold of you if Maybe you’ve sparked some questions or Maybe they want you to come moderate Their meeting to explain this yeah and By Betsy you can have a knock down drag Out She’s still got one good eye Patsy at Floridacamschools.com and uh and also my Phone 352-326-8365 this information is so Important be sure if you’re in you know Community Living Um just environment if that’s who you’re Networking with let them know about cam Matters share this information so that They can pass that on to the owners and And people who are involved so we thank

You so much Betsy I hope that you have a Great day and we’ll see you for the next Show okay thank you Thank you for listening to cam matters Be sure to subscribe so you don’t miss Any future episodes for more information Feel free to email Betsy at Betsy Floridacamschools.com or visit the Florida cam schools website at Www.floridacamschools.com information Provided on this show is General in Nature and does not constitute legal Advice please contact a licensed Attorney for your specific situation [Music]