Legal FAQ's


1. ORGANIZATION

2. INCORPORATION

3. BYLAWS

4. MEMBERSHIP

5. BARTERING

6. CONTRACTS

7. NAME CHANGE

8. INSURANCE

9. RAFFLES/CHARITIES

10. FEDERAL TAX ISSUES

11. STATE TAX ISSUES

12. EMPLOYMENT TAXES

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ORGANIZATION
What does it mean legally to be a GBTA Chapter/Affiliate?
GBTA and its Chapters and Affiliates have symbiotic relationships. Their goals/purposes are the same and they are dependent upon each other. The only difference is the magnitude: GBTA’s scope is global, a Chapter/Affiliate is more regional/state/local. However, GBTA, by virtue of tax laws, in the case of Chapters/Affiliates covered under the group exemption or a license agreement with the Chapter/Affiliate (to use the GBTA name and trademarks), is the “parent” to the Chapter/Affiliate, and serves in the more dominant role.

This is also seen in the fact that GBTA provides a myriad of services to the chapters to help them accomplish their mission. Thus, GBTA is both legally and under a good business model compelled to assert a certain level of control over its Chapters. Briefly, this is due to the fact that GBTA’s tax-exemption could be jeopardized by chapters (since GBTA is in essence “vouching” for the Chapters covered under its group exemption), as well as the fact that GBTA has developed a great deal of good will and name recognition in its brand. This reputation could be tarnished by ill-conceived, illegal, inadvisable, or inappropriate actions of third parties. (GBTA by no means suggests this is what occurs within its chapters, but merely wishes to point out that the possibility of it is what must keep it vigilant in its partnering with any party, including its chapters).

Chapters are encouraged to consult and coordinate with GBTA on their activities and programs. GBTA should be considered a partner and a resource that is involved in the inception, development, and execution of chapter events. Engage with the Manager, Chapter and Committee Relations for assistance.

What is the difference between chapters and affiliates?
"Chapters" and "Affiliates" are mutually exclusive although they share many characteristics. Although the nomenclature may vary, traditionally, a "chapter" is a subgroup of the whole -- for example, a state organization of a national organization. It suggests some relationship based on a common goal or purpose. Chapters receive additional benefits after signing the GBTA Chapter Charter agreement. 

An "Affiliate" is a chapter who signs the GBTA Affiliation agreement. They do not receive the same benefits as a Chapter, but has a relationship with GBTA.

How is a Chapter or Affiliate formed?
Groups wishing to form a Chapter or Affiliate organization should contact GBTA Chapter Relations to discuss the opportunity.

Are Chapters and Affiliates permitted to use GBTA’s name, logo and materials?
As GBTA’s name and logo are trademarked and its written materials (e.g., educational materials, on-line articles, documents and samples, etc.) copyrighted, Chapters are given permission to use GBTA’s name and logo along with other trademarks and copyrighted works. Chapters must link back to the GBTA website. Contact Chapter Relations for assistance.

Affiliates can also use the GBTA Logo as well and must link back to the GBTA website, but Affiliates have additional room to operate more idependently.

What are the requirements to be considered an active Chapter?
The Chapter Standardization Document below outlines nine requirements chapters must observe to be considered active. In addition to the Standardization Document, Chapters are required to sign and abide by the Chapter Charter agremeent.

1. Name Consistency – All chapters must be designated a Chapter,i.e. GBTA xxxx Chapter.
2. Minimum Number of Meetings – At a minimum, chapters must meet quarterly during a calendar year.
3. Chapter Membership – Chapters must strive for a balanced ratio of allied and direct members without limitation on the number of members by category.
4. Chapter Officers – Chapters are required to hold minimum officer positions, including president, vice president and secretary/treasurer. A minimum of two officers are required to be GBTA members. The president must be a member of GBTA.
5. CPC Meetings – Chapters must be represented at a minimum of two Chapter Presidents’ Council (CPC) meetings per calendar year. If the president cannot attend a CPC meeting, a chapter representative must be an officer with a GBTA membership.
6. Reporting Deadlines/CPC Dues – Chapters must provide CPC dues and required documentation to GBTA by the deadline set 60 days prior. Required documents include the current chapter roster, financial report and bylaws. In addition to CPC dues, each chapter is required to submit $200 annually, to be solely utilized for CPC scholarship funds and $300 for the CPC operating budget. Chapter presidents will be invoiced in November, followed by a reminder notice 30-days prior to the due date of January 31st. Chapters not in compliance will be sent a registered letter dated February 15th outlining consequences that may result in the loss of GBTA affiliation. A registered letter will be sent to the officers provided in item four – Chapter Officers.
7. Chapter Websites – All chapter websites are required to provide a link to the GBTA website.
8. GBTA Competitors – Chapter/Affiliate websites, speakers and programs must not promote GBTA competitors.
9. Chapter Growth – GBTA is designated to develop and manage geographic territories for future chapter growth.

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INCORPORATION
Should a chapter file Articles of Incorporation?
A chapter should be incorporated under the non-profit corporation law of the state where it is located. The corporate form generally insulates the directors, officers, and members from personal liability for debts of the chapter.

How do chapters incorporate?
Incorporation is accomplished by filing articles of incorporation with the appropriate state authority, usually the Secretary of State. These articles should include only the information required by state law, and certain “boilerplate” provisions necessary to qualify the chapter for tax exemption under Section 501(c)(6) of the Internal Revenue Code.
Most states have developed user-friendly web sites from which fill-in-the-blank forms can be downloaded, completed and submitted. A sample template of Articles of Incorporation can be located at http://www.nbta.org/chappres/chap_legal.htm .

What are the advantages and disadvantages of being incorporated?
Incorporation protects a nonprofit organization’s officers, directors, and members from personal liability for corporate obligations and any liability if corporate officers, directors, or staff violates the law in working on behalf of the group. The maximum liability of an incorporated nonprofit for damage claims will generally be limited to the amount of the assets of the corporation. Consequently, the individual’s personal assets will not be in jeopardy.

An unincorporated nonprofit is a group of persons acting together for a common purpose without a corporate charter, but pursuant to a constitution and/or bylaws which specify the agreement among members and the rules governing the organization. Statutory regulations governing unincorporated nonprofits are generally fragmentary and incomplete; in fact, the majority of statutes concerning unincorporated associations deal with their susceptibility to suit, not with internal organizational affairs.

An incorporated nonprofit has an existence of its own, independent of the terms of office or employment of members, directors, or officers. A corporation theoretically is perpetual although it can be dissolved or its existence can be limited from the outset. On the other hand, an unincorporated nonprofit lives and dies with its current members and technically is “reborn” under the law whenever there is turn-over on the governing body.

Protection of the corporate name may be easier if the entity is a corporation. State statutes will likely offer relief to an incorporated or unincorporated group when a new organization seeks to use its name; but an incorporated nonprofit, whose name is registered with the state, may find it easier to protect that name from infringement.

Incorporation is psychologically desirable because individuals and firms are accustomed to dealing with corporations; they tend to regard an incorporated nonprofit as more formally structured, more stable, and more businesslike than an unincorporated one. Obtaining insurance, for professional liability, for example, may be more difficult for an unincorporated nonprofit since in certain circumstances the insurance underwriter may not be able to determine the precise authority for the reorganization and operation. An incorporated nonprofit may not necessarily be more stable than an unincorporated one, but to some it may have the appearance of greater stability.

An incorporated nonprofit can own real estate in its corporate name in most states. An unincorporated group most likely will have to use the names of members and own the organization’s property with the members jointly, or hold the property through trustees.

An incorporated nonprofit can sue and be sued in its corporate name; an unincorporated group usually must go into court or be brought into court in the names of all of its members. Using the names of members could be procedurally cumbersome and could raise public relations or member relations problems. Further, all states have laws which give specific guidance for the organization and operation of a corporate entity, including an incorporated nonprofit. An unincorporated group may have no more than vague reference or authority for procedures when questions or doubts arise.

Realistically, a nonprofit must be certain of the legal implications of its organizational form, policies, and activities so that it may properly forecast the effect these factors may have upon its membership. Uncertainty in the minds of members can only serve to discourage entity growth and operation. Use of an unincorporated entity as an organizational form would only create avoidable confusion and unnecessary apprehension. It is considerably more advantageous to possess an intelligent understanding of the legal implications connected with varied organizational forms than to select a structure blindly. If the organization incorporates, on the other hand, it subjects itself to a known body of law.

A further problem involving unincorporated nonprofits concerns the title to real property. Courts have treated conveyances of realty as a transfer to the individual association members rather than to the group as an entity. Reconveyance, therefore, could require that each individual association member sign consent papers so as to make the transfer effective. If a nonprofit were composed of individual members, the spouses of such members would be required to relinquish their marital rights to the realty in question. Voluntary abandonment of the part of or interest in a deceased person’s real estate allotted by law to a spouse for their lifetime, or courtesy rights in property, is not easily acquired. The difficulties are apparent if one imagines an unincorporated association having hundreds or even thousands of members.

The disadvantages of incorporation are primarily related to the moderate expenses involved. Legal fees and filing costs are incurred when incorporating and franchise taxes for corporations are required annually in most states (although reduced rates are available for exempt organizations). Further, an incorporated nonprofit must observe various organizational and operational requirements set up by state law. Annual meetings must be held, minutes must be kept, and annual reports must be filed by incorporated organizations in most states. (However, as an unincorporated entity that is recognized as tax exempt, most likely the chapter already maintains these records.) If dissolution of an incorporated nonprofit becomes necessary or desirable, procedures for dissolution are sometimes complicated and can involve substantial legal expense. An unincorporated nonprofit can be dissolved by the will of the membership alone.

Obviously, the benefits to incorporation far outweigh any drawbacks and result in meaningful advantages to the organization.

How does my chapter file an annual report?
Most states require each corporation to file an annual report and pay a nominal fee in order to remain in good standing as a corporation. This annual report is normally simple to complete, but is frequently overlooked in the transfer of responsibility from one volunteer leader to another. Failure to file the annual report will result in revocation of the chapter's corporate charter, which could lead to potential personal liability on the part of the chapter's directors and officers for the chapter's debts.

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BYLAWS
What are bylaws?
Bylaws are rules adopted and maintained by a corporation to define and direct its internal structure and management. They are best used to detail how the organization is formed and how it is run.
Is there a sample to use as a guideline? Contact Chapter Relations.

Should bylaws be reviewed by legal counsel?
Yes, chapters are encouraged to submit their draft bylaws and/or amendments to GBTA’s Chapter Relations Manager.

How often should a chapter review their bylaws?
A good rule of thumb is to adopt a set of Bylaws and review it annually for consistency with current practice and/or any necessary updates. It should be noted that any changes to a Chapter’s Bylaws should be submitted to GBTA for approval.

Are bylaws necessary?
If incorporated, many states do require an entity to have an internal governance document, often called “Bylaws”. However, even if not required, they are highly recommended.

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MEMBERSHIP
What are the types of membership categories that chapters recognize?
The Global Business Travel Association, all chapters are required to recognize two categories of membership: Direct and Allied. Affiliates have the option to recognize additional categories, but are not limited to categories such as Retired, Honorary, Associated, and Student membership.

When I join the global organization, do I automatically become a member of a chapter or vice versa?
The GBTA All Access Membership provides an option to become a member of GBTA as well as select a Chapter for membership. It is not required, but highly encouraged to take advantage of this membership type. Affiliates are not eligible to take part in GBTA All Access Membership.

Is the membership the individual’s or the company’s?
GBTA recognizes that the membership runs to the company (i.e., a corporate membership in the chapter with the individual merely serving as the company’s representative). Many chapters recognize the membership as an individual, one that the person holds and takes with them (e.g., if member X switches from company A to company B, the membership stays with that person).

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BARTERING
What is bartering?
Bartering is trading a service or good for another service or good. Before you barter your chapter services, we recommend that you contractually establish terms with the other party. A contract is an effective way to delineate mutual responsibilities to ensure successful barter.
The simple language below is recommended when considering this type of transaction in your chapter:
Company X's dues for the 2004 calendar year will be paid, and accepted, in the form of goods/services.
Specifically: ________ (identify the service or good).
Company X's renewal for 2005 will be due on January __, 2005 and will be payable with money.
It's important to carefully research local and state tax laws and other regulations to properly implement reciprocal trade.

What items should chapters barter?
Before chapters barter their services (website, programs or advertising), they may wish to contractually establish terms with the other party using the language above. A contract is an effective way to delineate mutual responsibilities to ensure successful barter. Chapter Boards should identify what is available for bartering before entering in an agreement.
Possible items to consider for bartering are annual membership, opportunity to speak at chapter events, or free advertising on a chapter website.

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CONTRACTS
What are important items to include in contracts with website vendors?
It is important to include clauses on the possibility of getting out of the contractual agreement and on what happens if the contract is terminated (fees/services earned/provided up to and including the termination date).

It is important that contracts clearly state what the chapter gets to keep/own/use. The vendor is paid to develop the look/feel of the site, but the chapter/affiliate should have the "ownership" rights in it (copyright). Chapters/Affiliates should have a non-exclusive/royalty-free license to use the created materials indefinitely.

Also important is including a statement that the website vendor will indemnify the chapter/affiliate and hold the chapter/affiliate harmless for any intellectual property infringement. If they use someone else's protected work, we are, unknown to us, an accomplice, an infringer. They should protect us from this. They should warrant their work is theirs and they have the appropriate rights in it.

Finally, the section they use about protecting their "confidential" materials (entitled "Nondisclosure"), should be made reciprocal. To the extent they have access to important documents/membership lists, etc., they should agree to protect it from disclosure.

Is it necessary to have legal counsel review a contract when working with hotels and facilities?
No, it is not necessary to have legal counsel review each contract. If there are specific questions, we recommend they be forwarded to the GBTA Chapter Relations Manager who will contact counsel for a response.

One common issue that chapters have concerns about is liquor liability. It would benefit a chapter to include a LIQUOR LIABILITY INDEMNIFICATION CLAUSE in any contract. This clause could read:

The hotel/facility agrees to carry a minimum of one million dollars in liquor liability insurance and further agrees that all of its employees and agents performing services under this agreement shall at all times comply with all federal, state, and local laws pertaining to the sale, service or furnishing of alcoholic beverages.

Hotel/facility employees and agents shall not sell or serve alcoholic beverages to anyone attending the meeting who is under twenty-one years of age or to anyone, regardless of age, who is visibly intoxicated.

Hotel/facility agrees to indemnify and hold ____________________ harmless with respect to any and all claims, losses, damages, liabilities, judgments, or settlements, including reasonable attorney’s fees, costs, and other expenses incurred by ____________________ on account of any liquor related activities conducted by the hotel/facility pursuant to this agreement.

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NAME CHANGE
How can a chapter/affiliate change its name?
For a successful name change, the chapter/affiliate will need to follow the steps below:

Incorporated Chapter/Affiliate
1. A membership vote to change the name.
2. File the formal papers with the state - Articles of Incorporation addendum.
3. File with GBTA, if that chapter/affiliate is one covered by the IRS group exemption, which would notify the IRS of the name change when it files its annual update. (If the chapter/affiliate has its own exemption, it is required to send a copy of the state filed documents to the IRS, along with a statement that the change does not affect the nonprofit purposes for which it was originally granted exemption and ask the IRS to update its records).

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INSURANCE
What types of insurance should Chapters/Affiliates hold?
Officer and Director Liability Insurance: Generally speaking, “officer and director liability insurance” is not considered protection for the officers and directors but it is considered “prepaid legal defense” for the Association. This is due to the fact that officers and directors already have significant protections in the form of indemnification by the corporation (in the bylaws), the “corporate veil”, as well as Federal and state volunteer protection acts.

O&D liability insurance is widely available and written by countless carriers. The policies do vary widely in their coverage, terms, exclusions, conditions, limitations, definitions, deductibles, premiums, and endorsements. Typical exclusions include:

  • liability resulting from fraud or dishonesty,
  • unjust enrichment,
  • gross negligence,
  • personal injury or property claims,
  • fines imposed by law, and claims based on activities which occurred before the insurance was purchased.
     

General Liability Insurance:
This coverage is intended to be the umbrella protection for the association. If someone injures themselves at a Chapter/Affiliate event, if there is an alleged breach of contract, accidents, torts, general liability insurance will cover these types of claims (however these policies and their coverage are highly dependant upon the language of the contract).

Event Cancellation Insurance:
Event cancellation insurance provides a buffer for an organization if it is dependant upon the income from an event (the registration fees/revenues) if it is cancelled due to no fault of the parties (e.g., earth quake, war, strikes). Under this policy, the Chapter/Affiliate would receive the profit it intended to make from the event even though the event did not occur. This could be significant for an organization whose budget for the year is dependant upon the event and the event does not happen. It could mean the difference between a normal, successful year and possible failure and insolvency.

How does a chapter apply for the various types of insurance?
GBTA currently offers O&D Liability Insurance with AH&T Insurance. For policy details, or to apply, please contact CPC Leadership.

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RAFFLES/CHARITIES
What is a raffle?
A “raffle” is a legal term defined as: an event that has 1) an element of chance (the drawing), 2) a prize, and 3) consideration (the amount paid to participate).

Are chapters/affiliates permitted to organize a raffle?
Yes, chapters/affiliates are able to have a raffle but within the state laws. Most states, at a minimum, regulate private “raffles”; some have specifically prohibited them. In order to avoid the regulatory muddle of registration and reporting, or avoid breaking the law, organizations have attempted to structure fundraising events by eliminating one of the 3 criteria, therefore not having a “raffle”.

Most organizations elect to eliminate “consideration”. This can be done by the organization offering free tickets for the drawing but having a suggested contribution amount. Chapters/Affiliates considering conducting such a program should consult with legal counsel.

What are other forms of raising money for a chapter or an event?
Yes, other forms of fundraising, e.g., direct mail, or door-to-door solicitations, etc., are regulated in the majority of states with annual registration and reporting requirements for the non-profit that is soliciting. Any attempt to raise money, outside of the Chapter’s defined membership, should be preceded by consultation with legal counsel.

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FEDERAL TAX ISSUES
Should each chapter/affiliate have an Employer Identification Number?
Each chapter/affiliate must file IRS Form SS-4 to obtain an Employer Identification Number. This is not a “tax-exempt number”, but simply the chapter's unique identifier in the IRS records, like an individual's Social Security number.

Do all chapters/affiliates automatically become federally tax exempt?
Although chapters/affiliates are generally exempt from tax under Section 501(c)(6), if they comply with GBTA’s requirements to be covered under its group exemption, a chapter/affiliate that wishes to receive a determination letter to that effect from the IRS should file IRS Form 1024. Some states require that a separate application for exemption from state income or franchise taxes be filed.

How can chapters/affiliates file for federal group exemption?
GBTA offers a Group Tax Exemption under our current policy. Please contact GBTA Chapter Relations for further information.

Group exemptions are available to chapters/affiliates/subsidiaries under the parent organization. In order to relieve the chapters/affiliates of the obligation to apply for an exempt status, a national association may apply for a group exemption ruling from the IRS. Such a ruling would apply to all chapters/affiliates in existence at the time of the ruling as well as those that come into existence afterwards, assuming that such chapters/affiliates are otherwise in compliance with the Internal Revenue Code provisions applicable to exempt organizations.

Are there certain requirements to be recognized under GBTA’s Group Exemption?
The IRS does require a letter from the national organization which includes certain representations, made under penalties of perjury, as well as certain documentation. Below are the basic requirements for a group exemption:

  • Chapters/Affiliates must have or apply for an employer identification number.
  • Chapters/Affiliates must be on the same accounting period as the parent.
  • Chapters/Affiliates must be seeking an exemption under the same section of the Internal Revenue Code (though the parent could be exempt under a different section).
  • Chapters/Affiliates must consent to be included in the group exemption.

What is an IRS 990 Form?
Visit irs.gov for current information.

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STATE TAX ISSUES
Are there any State requirements for chapters?
Chapters/Affiliates should contact their individual Secretary of State’s Tax Division to get more information about state tax requirements. Each state may have different state tax laws; therefore, it is important to contact your state’s office for more information.

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EMPLOYMENT TAXES
What tax responsibilities do chapters/affiliates have when acquiring staff to support their chapters?
Chapters/Affiliates that have employees must also comply with tax withholding and deposit rules, and pay state and Federal unemployment compensation taxes, and may be subject to state workers' compensation laws. Chapters/Affiliates with employees must also file IRS Form W-2 annually, and chapters that pay speakers or other individuals or partnerships who perform services for the chapter at least $600 in any year must file IRS Form 1099-MISC to report those payments.