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For chapters with newly acquired property or chapters lacking a “landlord” for their house, creating a house corporation is one of the best things you can do. A house corporation not only acts as a landlord to oversee the management and maintenance of the chapter’s house and property, but it also ensures the safety and legality of the property. Here are five steps to creating your house corporation. Be warned, the process is complicated and can be very confusing and frustrating at times. However, the benefits and sense of security are well worth all the stress, time, and confusion.
Step 1: Start A House Corporation Fund
To start, establish a house corporation fee, parlor fee, or chapter assessment to create funds for the house corporation. This money will help start the corporation (pay for filing fees, legal fees, etc.) as well as create a starting fund for house improvements. In the beginning, the money should be collected by your chapter and saved in the chapter’s bank account (once the corporation is formed, a separate bank account will be created).
Step 2: Create The House Corporation Board (HCB)
The second step is to create the house corporation board (usually abbreviated HCB). The board is made up of alumni volunteers and collegiate members. The collegiate members on the board are usually chapter leaders or a chapter delegate elected to communicate information between the board and the chapter. We strongly recommend making board membership a requirement for, at the minimum, your chapter’s president and treasurer (this also includes attending board meetings). Recruiting alumni for your house corporation board can be difficult as many alumni have other responsibilities and time commitments such as work and family. Therefore, ask area alumni (alumni from other universities) as well as chapter alumni (alumni of your specific chapter) to volunteer their time. Ideally, your board should have a minimum of five alumni members to fill positions such as board president, vice president, treasurer, and secretary.
Step 3: Forms, Forms, Forms!
Next, gather the necessary information and fill out the forms. The house corporation will be a non-profit corporation. This means forms will need to be filed with your state government as well as with the federal government. Federal forms will include an application for an employer identification number (EIN), an application for tax exempt recognition (because it is a non-profit corporation), and a fee for the tax exempt recognition. To register the corporation with your state, following your state’s incorporation rules. Each state has their own set of rules, but most require you to submit an “Articles of Incorporation” or “Corporate Charter” that includes the name and purpose of the corporation. For more information, visit the online websites of the IRS and your local state’s government. Finally, tax return forms will need to be addressed as the corporation is required to file taxes. With all of these forms, your chapter has the option of using a law firm rather than filling them out yourself. If you choose to do so, be sure to choose a firm with experience in non-profit corporations, and possibly house corporations (try asking other fraternities or sororities for a law firm reference).
Step 4: Hold The First House Corporation Meeting
The fourth step is to hold your first house corporation meeting. As a corporation, you’re required to hold a public meeting every year for all members to attend (this includes alumni and collegiate members). At your first meeting, choose a name for your house corporation (usually your chapter’s name followed by “Corporation”), complete the corporation by-laws, elect alumni board members such as a President, Vice President, Secretary and Treasurer, establish the corporation’s fiscal year, and select a member to submit the corporation’s paper (this individual will also be the contact for the corporation with the IRS, state and federal governments). Additionally, decide when and where the board will meet (monthly, bi-monthly, at the chapter house, at an off-campus location, etc.) and make sure the schedule works with the collegiate members. The chapter president and the chapter treasurer should attend the first house corporation meeting to report the current amount in the house corporation fund.
Remember, as there is much to do at your first house corporation meeting, schedule appropriately and allow for time at the end. Additionally, as you need to make decisions and fill positions at your first meeting, high attendance is important. Give your alumni and collegiate members ample notice and extend the invitation to as many alumni as possible. Good alumni relations is key at this point as your chapter will be reliant on alumni to volunteer their time and run the house corporation in an efficient and responsible manner.
Step 5: Open A House Corporation Bank Account
The fifth and final step is to open a bank account for the corporation. The account should be under the name of the house corporation (not the chapter) and should use the EIN assigned to the corporation (again, EIN stands for the employer identification number assigned by the federal government). Do not open a bank account until you have the EIN as, otherwise, you’ll need to use your personal social security number. Additionally, consider opening a checking account rather than, or in addition to, a savings account. Since the house corporation pays for a number of things, having checks on hand will make things easier and less stressful. Note, however, that the checking account will probably require two signatures on the checks so choose board members who are available and around often.
Ask Questions and Use Your Resources
If, at any time during the five steps, you find yourself completely confused, lost, or just going around in circles, look to your chapter adviser, regional adviser, or national headquarters for advice. House corporation are created all the time as colonies become chapters and chapters find housing. The process, while complex, is familiar to most fraternities and sororities and the majority have experienced alumni who are happy to lend a helping hand and answer even the most mundane questions.
Disclaimer: Please note that the information contained in this article is purely suggestive and commentary in nature and should not be construed as legal guidance or research. The information contained in this article should not be used in place of formal legal advice, and we at ChapterTalk strongly encourage our readers to seek legal advice from legitimate legal and governmental resources.
