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SCA SUBSIDIARY TRANSITIONS

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SCA SUBSIDIARY TRANSITIONS Mazelle Attiya, SCA Corporate Treasurer Tom Hughes, SCA President * – PowerPoint PPT presentation

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Title: SCA SUBSIDIARY TRANSITIONS


1
SCA SUBSIDIARY TRANSITIONS
  • Mazelle Attiya, SCA Corporate Treasurer
  • Tom Hughes, SCA President

2
Agenda
  • Welcome and Introductions
  • Background
  • Transition Process
  • Opening New Bank Accounts
  • Reporting
  • Frequently Asked Questions
  • Wrap Up and Conclusion

3
Welcome and Introductions
  • SCA President
  • Master Sean oShaughnessy
  • Tom Hughes
  • 630-229-0926
  • Email president_at_sca.org

4
Welcome and Introductions
  • SCA Corporate Treasurer
  • Maitresse Alysia Gabrielle de Fougeres
  • Mazelle Attiya
  • (901) 833-4263
  • email treasurer_at_sca.org

5
Background
  • Why is SCA forming Subsidiary Corporations?
  • SCA was created in 1966.
  • SCA, Inc. was formed in 1969 and has operated
    successfully ever since.
  • SCA formed affiliate corporations in those
    countries requiring in country corporations for
    not-for-profit corporations.
  • Forming US subsidiary corporations will reduce,
    if not eliminate, the cost of complying with new
    State laws covering not-for-profit organizations.

6
Background
  • Illinois transition has been completed
  • 150,000 gross revenues threshold triggers
    audited financial statements estimated cost
    gt150,000/year for all 700 branches in US.
  • Applies to all not-for-profits operating in
    Illinois.
  • Boy Scouts, Girl Scouts, hospitals, etc.
    completed their transitions last year
  • SCA, Inc. had revenues of 4.5 million in 2007
    (SCAs IRS Form 990).
  • Need to structure corporation to less than
    150,000 per year in revenues to avoid audited
    financial statement requirements.
  • 19 bank accounts in 18 local groups and 1 kingdom
    account at start of process.
  • 1 kingdom account moved out of state 1 group
    dissolved 17 groups created new bank accounts.

7
Background SCA-Illinois Milestones
8
Background
  • Wisconsin - Completed July 31, 2010
  • West Virginia in process
  • Michigan starting (2 kingdoms involved)
  • New Jersey - starting

9
Transition Process
  • Lessons learned from SCA-Illinois, Inc.
    Transition
  • Preparation at SCA Corporate level
  • Preparation at Kingdom and Regional levels
  • Converting or moving kingdom bank accounts
  • Transitioning regional bank accounts
  • Transitioning local branch bank accounts
  • Communication is crucial!

10
Transition Process
  • What do we need to do?
  • Form subsidiary as a wholly owned subsidiary of
    SCA, Inc. per Federal and State laws SCA Board
    of Directors.
  • Complete Articles of Incorporation SCA
    attorneys.
  • Complete By-Laws SCA attorneys.
  • Apply for and receive Federal Taxpayer ID Number
    SCA Corporate Office after attorneys finish
    above documents.
  • Make all documents available to local branch,
    regional and kingdom exchequers Society
    Exchequer.
  • Close out existing bank accounts under SCA, Inc.
    local exchequers.
  • Open new bank accounts local exchequers.

11
Transition Process
  • New banking requirements due to Patriot Act
    subsequent to 09/11/01
  • Banks conduct more due diligence on new bank
    accounts, especially, not-for-profit accounts.
  • Bank accounts opened prior to Patriot Act banking
    requirements implemented will require more
    documentation than banks have for current
    accounts.

12
Opening New Bank Accounts
  • SCA Corporate Documents
  • Articles of Incorporation for the subsidiary
    (created by SCA attorneys)
  • By-Laws for the subsidiary (created by the SCA
    attorneys).
  • Tax Payer Identification Letter (created by the
    US IRS).
  • Resolution of the Board of Directors to open bank
    account (created by the SCA, Inc. Corporate
    Secretary (Vice President of the Corporate Office
    in Milpitas, California). Must be faxed or
    mailed directly from the Corporate office
    directly to the individual banks representative
    for the bank/checking account.
  • Letter of Authorization specifies signatories on
    bank account of authorized named, specific
    individuals to a bank account. (created by the
    SCA, Inc. Corporate Secretary - Vice President of
    the Corporate Office in Milpitas, California).
    Must be faxed or mailed directly from the
    Corporate office directly to the individual
    banks representative for the bank/checking
    account.

13
Opening New Bank Accounts
  • In order to get a Resolution of the Board of
    Directors to open bank account, local branches
    must send the following information to the
    Society Exchequer who verifies accuracy and
    completeness and send request to SCA Corporate
  • Name of the local SCA group
  • Modern names of the signatories (This must
    include kingdom and/or regional exchequer as a
    signatory on the account)
  • Bank name
  • Bank address
  • Name of bank contact/to whom the paperwork should
    be sent
  • Bank's fax number
  • Contact phone number and/or e-mail address with
    the Modern name of the Group Exchequer in case of
    bank communication problems

14
Opening New Bank Accounts
  • Exchequer and all bank account signatories fill
    out bank required forms and present following to
    the bank
  • Articles of Incorporation
  • By-Laws
  • Federal Taxpayer ID letter from IRS
  • SCA VP of the Corporate Office, Renee Signorotti,
    will fax Resolution of the Board of Directors to
    open bank account to bank point of contact
  • Exchequers and co-signatories
  • Transfer funds from old bank account to new bank
    account suggest that local branches use same
    bank for old and new accounts and change banks
    later if they want to change banks
  • Close out old bank account with bank manager
  • Deposit all funds from old bank account into new
    bank account
  • Retain bank statements for both old and new
    accounts

15
Exchequer Reporting
  • Continue reporting all income and expenses on
    SCA, Inc. until subsidiary formed and
    transitioned. Report donation to another 501c3
    from SCA, Inc. to subsidiary to close out old
    bank account.
  • Begin reporting all income and expenses on
    subsidiary after transition completed. Report
    donation from from SCA, Inc. to subsidiary to
    open new bank account.
  • At end of quarter and year, exchequers prepare
    quarterly and Domesday reports for both old bank
    account showing zero balance and new bank account!

16
Exchequer Reporting
  • New State specific exchequer workbooks have been
    developed and are currently being verified.
  • New State specific exchequer workbooks will be
    available for third quarter 2010.
  • Kingdom exchequer will prepare consolidated
    Kingdom Domesday report including, subsidiary and
    prepare a separate Domesday for subsidiary.

17
Frequently Asked Questions
  • What is the procedure for transitioning to
    subsidiary corporations?
  • Standard Operating Procedure for the Formation Of
    and Transition To Subsidiary Corporations Of SCA,
    Inc.

18
FAQs
  • Why is this necessary?The SCA, Inc. needs to
    register as a foreign corporation in all states
    in order to do business legally. Some states have
    restrictions and/or requirements for corporations
    registered as foreign corporations that the SCA,
    Inc. cannot satisfy. Setting up a subsidiary
    corporation allows the SCA, Inc. to register and
    do business in that state without some of the
    unwieldy restrictions and/or requirements.
    Please note, foreign corporation simply means
    a corporation that is not based in that
    particular state.

19
FAQs
  • Why isnt registration with the state
    sufficient?Registering with a state is
    sometimes not as simple as filling out a form and
    paying a fee every year. Some states require
    foreign corporations to file state income tax
    returns. Even though we may not pay state taxes,
    we will still have to file tax returns. Some
    states also have financial auditing requirements,
    including formal audits of branches where the
    corporation is sufficiently large. Multiple
    states fall into this category at this time.

20
FAQs
  • Who makes this decision?The SCA, Inc. Board of
    Directors, the SCA President, and the SCA
    Treasurer make the decision to create subsidiary
    corporations.
  • Who is responsible for implementing this?The
    SCA Treasurer, the Society Exchequer, the Kingdom
    Exchequer and all branch Exchequers within the
    state are responsible for implementing the
    transition to subsidiary corporations. The
    Seneschal equivalents at all those levels must
    assist in this for several reasons. Most of the
    seneschals are also signatories and bank accounts
    and the seneschals continue to ensure that the
    SCA meets all of its legal obligations.

21
FAQs
  • How is this different from affiliation like SCA
    Australia and other affiliates?Affiliated
    organizations are subject to different civil laws
    in their countries, and so their corporate
    documents are not the same. Their Boards of
    Directors are completely different people. The
    only thing affiliate organizations share with the
    SCA, Inc. is Corpora.A subsidiary company is
    one whose controlling interest is owned by
    another company. Subsidiaries use the same
    corporate documents except for those that
    specifically apply to the state. So SCA, Inc. and
    SCA-IL, Inc. share not only Corpora, but the
    Corporate Policies and any other governing
    documents that do not have a specific SCA-IL,
    Inc. version.

22
FAQs
  • Why do this?Several states require that
    corporations having over different threshold
    gross income submit to (and pay for) formal
    audits of all included branches. The SCA, Inc. is
    well above that income limit. If the SCA, Inc.
    itself was to register in states, we would not
    have enough money to pay for the formal audits of
    all US SCA branches even once. The branches in
    individual states together do not come close to
    the annual income amount, so creating a
    subsidiary and registering that subsidiary sin
    will allow us to operate within without those
    costly audits for a while.

23
FAQs
  • Is my state first?No. Illinois was the first
    state in this situation. Like Illinois, the local
    groups in many states all fall under the same
    Kingdom making it simple to convert. Those
    states with multiple kingdoms will require a
    little more work for the Society Exchequer but
    not the local branches.
  • Will other states need to do this too?There are
    other states in similar situations that will need
    to go through this process. States containing
    more than one kingdom and local groups residing
    in more than one state will be more difficult to
    transition to subsidiaries.

24
FAQs
  • How many states have formed subsidiaries?
  • As of October 2010, there are a total of 6
    subsidiaries
  • Illinois
  • Wisconsin
  • West Virginia
  • Michigan
  • New Jersey
  • Maryland

25
FAQs
  • What does the new corporation look like? Who is
    the Board of Directors? When are their Board
    meetings?The new corporation looks like a
    small, mirror image of SCA, Inc.The Board of
    Directors of the SCA-Wisconsin, Inc. is the same
    as the Board of Directors of SCA, Inc. The
    SCA-Wisconsin, Inc.s Articles of Incorporation
    are almost exactly the same as the SCA, Inc.s
    Articles of Incorporation. Corpora is the same,
    Bylaws are the same, Corporate Policies are the
    same.The Board meetings will be at the same
    time and place and be similar to a court where
    the Crown allows a Baronial Court as part of
    their Court. The Board meeting for subsidiary
    will open, and if there is any business, it is
    conducted. Then that meeting will close, and the
    meeting for the SCA, Inc. will open.

26
FAQs
  • What about SCA members living in subsidiary
    corporations? Are they members of SCA, Inc.
    anymore?SCA, Inc. members in subsidiary
    corporations are still members of SCA, Inc. There
    wont be any members in the subsidiary
    corporations except for the Society for Creative
    Anachronism, Inc. SCA, Inc. membership cards are
    still in effect, and nothing changes about the
    process of purchasing membership for anyone in
    subsidiaries.

27
FAQs
  • Are there any changes in events in subsidiary
    corporations?No and Yes.
  • Events can occur just the same as they do today.
    SCA, Inc. insurance will still be available for
    events and practices.
  • The only change is that all ads have to say to
    make the check out to SCA-state, Inc. -
    branch instead.

28
FAQs
  • Are there any changes to how the branches in
    subsidiary corporations will do business?No,
    the subsidiary branches shouldnt notice any
    change in anything other than the one-time change
    of bank accounts, and financial reporting going
    forward. Nothing else changes due to this
    transition.

29
FAQs
  • How do we handle Certificates of Deposit that
    mature?
  • Let the CDs go to full maturity, close them out
    of SCA, Inc., donate funds to the subsidiary when
    they mature. Show the CD as an asset on SCA,
    Inc. and as a payable to subsidiary on quarterly
    and Domesday reports.
  • When the CDs mature, open new CDs if that is
    the desire of the local group. This avoids
    incurring early cancelation fees and complies
    with the contractual requirements of the CDs.

30
Wrap up and ConclusionAny other questions?
  • Thank you
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