July 2003

 

 

 

To:  Council and/or Local Unit President

From: Bruce O. Butz, State PTA Treasurer

Subj:  Question and Answer Guide to Incorporation

 

Since Maryland PTAs are now to be incorporated according to the bylaws passed in November of 2002, Maryland PTA is providing this guide and “Articles of Incorporation” to be used by those units who have not yet incorporated.  Incorporating is an important way to protect PTA volunteers from debts and legal obligations that may be incurred by a PTA.

 

What is a corporation?

“A Corporation is a non-personal entity, created by law, that can own assets and incur liabilities.  Most importantly, the corporation exists separate and apart from its owners. Under and incorporated entity, the owner’s only liability will be his or her investment (stock), which does not apply to a PTA as it is a non-stock corporation.”

(National PTA, Our Children, December 2001)

 

Incorporating (state), filing for 501(c)(3) status (federal), and applying for an EIN (federal) are separate transactions.  Local PTAs are not covered under National PTAs incorporation.

 

Where do we get information?

Information is available from the legal community, the State Department of

Assessments and Taxation, Maryland PTA, or your PTA council.

 

How is a corporation established?

Maryland State PTA holds the parent charter.  The local unit PTA and council PTA are affiliates.   An application must be filed with the State Department of Assessments and Taxation.  This application includes the location, the purpose of the business (based on the PTA’s mission), the names of the management, and length of the corporation’s life, which is perpetual.

 

Why incorporate?

PTAs involved in various activities must recognize the responsibilities of the officers and members in conducting the affairs of the organization.  PTAs incorporate to establish protection for and limit the liability of individual members.  Maryland PTA now mandates incorporation.

 

The most significant feature, and the major advantage, of a corporation is its ability to shield from liability.  However, it should be noted that it would not prevent a liable action.  Because of PTA’s non-profit status and its use of volunteers, liability is generally limited.  (The Maryland PTA’s bylaws now state that local units and councils be incorporated.)

 

What are the disadvantages of incorporation?

The disadvantages of incorporation are minor.  Effective July 1, 2003, an initial, one-time fee, of $120.00 must be paid to the state of Maryland.  The other disadvantage is that an annual Personal Property Return MUST be filed with the Department of Assessments and Taxation.

 

What is the purpose of the Personal Property Return?

Although most PTAs do not own personal property, the Personal Property Return must be filed to update the list of current officers and to report the dollar amount of business transacted in the state during the calendar year.  There are no annual fees for non-profit organizations associated with the filing of this return.  However, to file the report you will need to have a Federal Employer Identification Number (EIN).

 

What happens if the Personal Property Return is not filed?

The Personal Property Return is mailed out in January and must be completed and returned by April 15.  If the Personal Property Return is not filed, the corporation will forfeit its charter and, therefore, lose the ability to shield individuals from liability.  There is a $25 per month fine associated with the improper filing of or failure to file this form by the deadline.

 

What happens if our charter is forfeited?

You will need to call the Department of Assessments and Taxation and request “Articles of Revival”.  There is a fee of $120.00 and the Articles of Revival must be notarized.  Call Maryland PTA for a Charter Revival packet.

 

How do you incorporate?

You have already completed the first two steps by deciding to have your PTA incorporated and sending for this information.  Complete the attached “Articles of Incorporation” according to the directions below.  Make out a check for $120.00 payable to the “Maryland State Department of Assessments and Taxation”.  Mail both to Maryland PTA, 5 Central Avenue, Glen Burnie, Maryland 21061 for the Resident Agent’s signature.  The Articles of Incorporation does not have to be notarized.

 

How do I complete the “Articles of Incorporation” form?

 

Name of Association:  The exact name of the PTA followed by a comma and one of these words – Corporation, Incorporated, Limited, Inc., Corp., or Ltd.  The name cannot be misleading or similar to a name already on record in Maryland.  You can call the Maryland State Department of Assessments and Taxation for a non-binding check for name availability.  You can also visit their web site http://sdatcert3.resiusa.org/ucc-charter/ and click on Business Entity Information.  Or, use this RTF file.

First:  The address of the school.

Second:  Enter the same exact name that you used in Name of the Association above.  The Department of Assessment and Taxation will return the application if the names do not match.

Sixth:  The address of your school.

Next:  Three officers should sign the application, provide their printed names and home addresses, and fill in the date.

Finally:  Send the form, along with your check, to Maryland PTA for the State President’s signature.

 

What do I have to do next?

 

When your Incorporation Charter arrives, make several copies.  Place the original in a file along with your other original important documents.  Give one copy to your Treasurer and send one copy to your PTA Council.  In the event a council does not service your school, send a copy to the Maryland PTA Treasurer.