Ice Skating Training Facilities


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Business Financial Structures -
Ways to structure ice rink ownership  

Common Business Structures

      There are common business structures used to finance large real estate developments such as planned communities, shopping centers, professional sports arenas, and entertainment complexes, etc..

      Ideally businesses should place the production of high quality products as a first priority. However, in an attempt to improve the bottom line, short cuts are taken allowing defective designs and shoddy manufacturing practices that place the public in harm.  There also is an emphasis on using the legal system to defend inferior products that lacked properly testing before going into full production. 

      There are two principal concepts that seem to be widely embraced by the business community:
  1. Use someone else's money
  2. Spread the risk to other entities
     The basic business organization is involved in various development stages in bringing a project from  its inception to market. The stages of a brick and mortar project range from:
  • Concept Plan
    • Zoning considerations
    • Preliminary Environmental Impact Report
  • Project Financing*
  • Land Acquisition*
    • Purchase option on land The right to purchase a specific parcel of land is acquired for "X" dollars for  a set period of time for specific terms.
    • Lease land with option to buy
    • Deposit and Purchase Agreement with specific terms and conditions that must be met for purchase to be completed. Deposit forfeiture depends on the terms and amount of time to close escrow. Common Law Recovery of deposit depends on the non completion of the contract terms.
  • Master Zoning and Land Use Plan for development of roads, parking, and layout of facilities, etc.
  • Construction of Buildings
    • Major anchor tenant(s) - occupant(s) to finish to their needs
    • Chain Stores and Franchise occupants - franchise owners to finish to their needs
    • Independent non chain stores - occupants to finish to their needs
  • Future Development should require reserving space for expansion
*Note: These stages may actually be pursued simultaneously or in reverse order.

     A central management firm will be responsible for the timely completion and leasing of the project; However, there may be layers of ownership who hold titles to the land and long term leases to the structures.

Financial Considerations:

Filing for tax exempt status:
      Most curling, figure skating, speed skating, and hockey clubs are registered as a corporation and have filed for federal and state tax exemption status under the IRS tax code 501(c).

     This makes the process of forming a Local Organizing Committee (LOC) and raising funds that are tax deductible an simple process compared to having to start from scratch to achieve a tax exempt status.

     The following links are provided as necessary background information about raising funds to finance an ice rink or large recreational/sports complex.

Publication 4220 (Rev. 8-2009)
     Pertaining to organizations applying for exemption from federal income tax.

Obtaining State and Federal Tax-exempt Status
      The operations of nonprofit organizations are subject to both state and federal laws and regulations.

      A 501(c) organization is an American tax-exempt, nonprofit corporation or association. Section 501(c) of the United States Internal Revenue Code (26 U.S.C. § 501(c)), provides that 28 types of nonprofit organizations are exempt from some federal income taxes. Sections 503 through 505 set out the requirements for attaining such exemptions. Many states refer to Section 501(c) for definitions of organizations exempt from state taxation as well.

GO_Chap7 insert
    Applying for Federal Tax-Exempt Status. This insert replaces Chapter 7 of Getting Organized (Fifth Edition). It summarizes the requirements of the Internal Revenue Service.

Tax Information for Non Profit Organizations
      Sections of include the following topics:
Business structure:
Sole Proprietorship vs. C Corporation vs. S Corporation vs. LLC

A limited partnership (LP) consists of two or more persons, with at least one general partner and one   limited partner. While a general partner in an LP has unlimited personal liability, a limited partner's liability is limited to the amount of his or her investment in the company.

      Because the general partner is exposed to unlimited personal liability, LP's sometimes are set up so that the general partner is a corporation or an LLC.

A general partnership (or simply partnership) is an association of two or more people carrying on a business with the goal of earning a profit. A partnership is viewed as being one and the same as its owners.

     Distinctions Between Limited Partnerships and General Partnerships
     Three distinctions between limited partnerships and general partnerships are:
  • LP's are created by statute, not by intentions of the partners.
  • Ability to override the partnership agreement.
  • LP's are created by statute, not by intentions of the partners.

     Tax treatment - a limited partnership normally has pass through taxation, but must meet certain   
     criteria to avoid being taxed as a corporation.

Partnership Taxation
      Like a sole proprietorship, a partnership has only one level of taxation. A partnership is a tax reporting entity, not a tax-paying entity. Profits pass through to the owners and are divided in accordance with what is specified in the partnership agreement. There are no restrictions on how profits are allocated among partners as long as there is economic reason, so there is latitude in allocating income according to which partners have the best tax rates.

Liability
     While pass through taxation is an advantage, owners of a partnership have unlimited personal liability. In general, each partner in a partnership is jointly liable for the partnership's obligations. Joint liability means that the partners can be sued as a group. Several liability means that the partners are individually liable. In some states, each partner is both jointly and severally liable for the damages resulting from the wrongdoing of other partners, and for the debts and obligations of the partnership.

Three liability rules in a partnership:

  1. Every partner is liable for his or her own actions.
  2. Every partner is liable for the actions of the other partners.
  3. Every partner is liable for the actions of the employees of the business.
Corporations
In forming a corporation, prospective shareholders exchange money, property, or both, for the
corporation's capital stock. A corporation generally takes the same deductions as a sole proprietor- ship to figure its taxable income. A corporation can also take special deductions. For federal income tax purposes, a C corporation is recognized as a separate taxpaying entity. A corporation conducts business, realizes net income or loss, pays taxes and distributes profits to shareholders.

The profit of a corporation is taxed to the corporation when earned, and then is taxed to the shareholders when distributed as dividends. This creates a double tax. The corporation does
not get a tax deduction when it distributes dividends to shareholders. Shareholders cannot deduct any loss of the corporation.

Corporations that have assets of $10 million or more and file at least 250 returns annually
are required to electronically file their Forms 1120 and 1120S for tax years ending on or after December 31, 2006.


Should a Small Business consider becoming an S Corporation?
     An S Corporation (Small Business Corporation) is a business elected for S Corporation Status through the IRS. This status allows the taxation of the company to be similar to a partnership or sole proprietor as opposed to paying taxes based on a corporate tax structure.

     Reasons to organize as an S Corporation:
  • No Corporate Tax
  • Reduce Taxable Gains
  • Reduce Taxable Gains
  • Liability Protection
    Reasons to organize as an S Corporation:
  • One Class of Stock
  • Less Attraction for Outside Investors - pass through tax setup or a limit of 75 shareholders
  • Tax Filing avoids corporate taxes
  • Corporate Meetings required
Limited Liability Company (LLC)
     The limited liability company or LLC is now a very common legal entity used by small business owners.  This type of business entity was specifically created to provide the benefits of the other legal choices (corporations, partnerships) but without the disadvantages of those same entities. This form of business ownership provides a business owner with limiting liability, as in a corporation, while providing more flexibility to run your business and the choice of how to be taxed.

Source - wisegeek.com
     A limited liability company is not taxed as a separate entity. In the United States, a limited liability company is often referred to as an LLC — many people incorrectly interpret this acronym to mean limited liability corporation. In the United Kingdom, a limited liability company is marked as Limited or Ltd., in contrast to public companies, which are referred to as a "PLC".

     Once a sole proprietorship has been granted limited liability company status, the owner bears much less responsibility for prosecution and debt issues that the business may undergo. Declaring bankruptcy, for example, can be an enormous headache for a sole proprietorship, incurring serious personal consequences for the owner's credit rating. While bankruptcy is of course never cause for celebration, as a limited liability company, the owner need not worry about his or her personal finances becoming caught up in the business' problems.

     While an LLC is the obvious choice for many business owners, for others it may not be worth it. While the accounting and paperwork involved in creating a limited liability company and handling its taxes are substantially easier to deal with than those of a corporation, they are nonetheless more complex than those of a simple sole proprietorship or partnership.

     The decision to become a limited liability company should be carefully considered and discussed with the business accountant, who is familiar with the tax code and its implications.  An LLC is an option that any sole proprietorship should look into to avoid potential legal or economic problems.

Related wiseGEEK articles:

Recommend Reading:
  1. Park and Recreation owned and operated community rinks
  2. Church Owned and Operated Community Centers
  3. Private Membership Skating Clubs
  4. Privately Owned Rinks Open to Public
  1. Market Analysis Summary
  2. Amenities and Services
  3. Naming Rights
  4. Strategy and Implementation Summary
  5. School and Community Programs & Activities
  6. Charter Schools
  7. Competitive & Recreation Athletes Health & Wellness Services
  8. Management Summary
  9. Job Descriptions
  10. Financial Plan
  11. Ice Rink Executive Summary
  • Historical References:
Resources:

The following internet links have been gleaned from personal communications
combined with information from public institutions and athletic organizations/
associations that have a web presence with information concerning team and
individual sports programs:

The Ultimate Ice Skating Facility
Introduction
Planning a New Ice Skating Rink
Summary - Developing New Ice Skating Rinks
Executive Summary
Formulating a Rink Proposal
Feasibility Study
Demographics
Business Financial Structures
Rink Feasibility Study
Facility Design Issues
Facilities Concerned with Design
Design Principles
Ice Skating Rink Business
PDF  When Bigger is Better
PDF  How An Ice Arena Works


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