Turning Your Short-Term Rental Alliance into an Incorporated Nonprofit Trade Association

Check the Secretary of State’s Business Registry in your state to see if the name you selected is available and register the name there. The cost of registering your organization’s name starts at $25 and up, depending on your state. Some states offer both an electronic and mail-in option.

Recruit at least four board members who make decisions for your organization. A nonprofit needs a board to make decisions, manage finances and marketing activities, hold events, lead members, and other functions.

File articles of incorporation with the Secretary of State’s Business Registry in your state. The electronic form typically lays out all of the details that you need in the articles of incorporation.

Typical requirements include:

• Corporation’s name
• Name and address of the registered agent (PO Boxes are not acceptable)
• Type of corporation
• Areas of operations for the corporation
• Names and addresses of initial board directors (PO Boxes are not acceptable)
• Duration of the corporation
• Name and address of the incorporator (The incorporator is typically a founding member and officer like the organization’s president. The incorporator could be the same or different from the registered agent).

Note: Each state may have slightly different filing requirements and terminology.

An Employer Identification Number (EIN) is a unique, nine-digit number assigned by the IRS to identify your nonprofit. You will need the EIN to open a bank account, apply for 501(c)(6) status, and submit annual tax returns to the IRS.

You can request an EIN on the IRS website for no charge.

However, make sure you have all the information you need before filling out the online form because you must complete the application in one session, and the session will expire after 15 minutes of inactivity. You will not be able to save the form and return to it later.

You also have to fill out the application during business hours, which are 7 a.m. to 10 p.m. EST.  The system doesn’t work outside of those hours.

The person applying online must provide a Taxpayer Identification Number so make sure you have that on hand when you fill out the application.

Under xxx, select “Other Nonprofit Tax-Exempt Organization.”

Under “Why are you requesting an EIN,” select “For Banking Purposes.”

The EIN application requires both the incorporator’s personal address and a business address for the organization. PO boxes are not accepted. However, if your organization doesn’t have an office, you can use the incorporator’s home address as the business address.

Bylaws spell out the internal operating rules of the organization. In some states, such as Oregon, the Secretary of State’s Office has a fill-in-the-blank bylaws, which outline the most basic information required. 

The bylaws should outline the process for the election and tenure of directors; rules on how to conduct board meetings (e.g. notice requirements, having a quorum, and voting thresholds); appointment of officers; and creation of board committees. It’s advisable to have an attorney familiar with your state laws help draft or review your bylaws.

Next, convene your members in a meeting or online to vote on the bylaws and board roles. Keep meeting minutes. (The requirements for this may vary by state.)

Pro tips:

• Keep bylaws simple so that future members who didn’t go through this process can understand them. Simplicity also allows for the board to avoid needing to change the bylaws often, which requires votes and can be time consuming.
• Keep an odd number of voting board members to prevent gridlock.
• If you need a sample bylaws, a number of nonprofit organizations have theirs posted on their website for public access.

In order to vote on anything, the board needs a quorum, which means that more than 50% of the board members are present at a formal meeting. Therefore, having a larger number of board members can provide an advantage in achieving a quorum on a regular basis. A six-person board is going to be more reliable than a four-person board, for instance.

Consider having set terms for each board position that are staggered so that you don’t end up with a new board all at once. For example, give each board member a two-year term, and make half of the terms expire the first year and the other half expire the second year. Having a definite expiration date for a term allows a board member to commit to a certain time frame and allows the board to replace members who aren’t a good fit at the end of their term.

Before soliciting funds for your organization, you’ll need to start a nonprofit bank account. Banks require the following paperwork to open an account:

• A copy of your articles of incorporation
• A copy of the bylaws
• Your EIN

Directors and officers insurance (D&O) protects the individual members of the Board of Directors, the management of an organization, and the organization itself by helping to cover legal defense costs, settlements, and judgments resulting from wrongful act lawsuits. In some cases, it could prevent your organization from facing bankruptcy in the event of a large judgment against you.

D&O insurance covers three major areas:

• Legal claims resulting from decisions by the board
• Claims alleging fraud, improper fiduciary oversight, or wrongful use of membership dues
• Lawsuits resulting from employee activities

D&O costs between $250 and $10,000 per year, depending on your revenue and level of risk, according to the Cost Guys. Most STR alliances will likely pay around $500 per year for their premium.

If money’s tight, conduct a risk assessment of your organization’s chances of getting sued. 

Conflict of Interest Policy

A conflict of interest policy is an instruction manual for how your organization navigates potential conflicts involving organizational decisions which impact the organization’s directors, officers, and key employees in their individual capacities. For instance, will you allow a married couple or two partners who own a large property management company to each have a board seat?

Nondiscrimination Policy 

Nondiscrimination policies ensure an association welcomes all members and does not tolerate discrimination.

Sample: [Insert nonprofit name] shall not discriminate on the basis of race, color, religion (creed), gender, gender expression, age, national or ancestral origin, disability, marital status, sexual orientation, or military status, in any of its activities or operations. These activities include, but are not limited to, appointment of board members, hiring and firing staff, selection of volunteers, membors, and vendors, and provision of services. We are committed to providing an inclusive and welcoming environment for all members, staff, volunteers, subcontractors, and vendors.

Other Policies

Another important governance policy for short-term rental operators is no group discussion of individual nightly rates. As a trade association, you are competitors who are gathering as a unified voice. Getting trapped in antitrust and price-fixing activities can undermine your purpose and credibility.

To apply for federal nonprofit status, you will need to fill out IRS Form 1024. To fill out the form, you must register for an account on Pay.gov. Enter 1024 in the search box and select “Form 1024.”

As of January 2022, the form must be submitted electronically. The application fee as of June 2022 is $600. Once the application is completed, verify the filing fee with the IRS before submitting it. If the fee has increased and you pay the previous fee, your application could be rejected, delaying the entire process by up to two months.

Those applying to become a 501(c)(6) need to fill out only the first 22 pages of the 42-page PDF. The last 20 pages are only for other kinds of nonprofits.

The application form asks for detailed information about your organization and activities and requires detailed financial history information and/or financial projections for the next three years. If your organization has no financial history, make an educated guess on your projections for revenue. 

More detailed instructions for filling out the form are available on the IRS website, and there is a 1-800 phone number where you can ask for help. See additional helpful links here.

Important: Keep a copy of the completed form in your organization’s permanent records.

As a nonprofit, you do not have to pay taxes, but you must apply with the IRS and the state to get this status. Familiarize yourself with your state’s requirements for recognizing your nonprofit’s tax-exempt status. This varies by state. In Oregon and Florida, for example, you don’t need to apply for state tax exemption because the state recognizes all federally recognized nonprofit organizations. However, you might be required to file an annual report with your state, which identifies your officers. The annual report is typically due in the springtime. Google your state’s name and “nonprofit annual report” to find specific guidelines for your state.