How are Funds Distributed When Selling a Nonprofit

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Guest: Do I have a question regarding selling a nonprofit corporation. It’s registered with the state of Michigan as a recreational club. There’s 10 members in the club and we decided to sell it. Um, and there’s some concern about distributing the funds. Are the funds to be distributed equally among all the, all the members or how is that done to you?

Brian: Well, tell us, tell us a little bit about the, uh, the nonprofit. Does it have any assets of any kind?

Guest: Yeah, we sit on 200 acres and have a, uh, a small cabin and a couple of old buildings. We have it listed for 225,000.

Brian: So let me ask you what, what part of that is the nonprofit? I don’t understand that. Do you guys do any service for the public or anything like that? Cause it, it doesn’t sound like necessarily it is a qualified, technically as a nonprofit,

Guest: I don’t know. It was, the cubs has been in existence for about 58 years and I’m the only been a member like several, several years. So when it, when it was originated by the, you know, the original folks who had bought the property, they registered it, uh, to the state, to the state and the feds federal, I think as a nonprofit corporation. That’s what I’m told.

Brian: Yeah.

Guest: I mean,

Justin: do you guys, do you guys have any kind of operating agreement when you said when they set this thing up, they kind of dictates what you’re supposed to do?

Guest: Well, I’m looking at the bylaws now and I, there’s nothing in there that defines all, it says it’s a recreational club that that’s all it says.

Justin: Right. But usually in, in bylaws or any kind of operating agreement, it’ll tell you what happens when you’re dissolving the corporation of how you are. I guess

Guest: that’s the issue with those.

Brian: Oh, okay. So let me ask you this. How do you guys handle members who come and then leave? I mean, do you get an actual, uh, uh, a document that says they’re resigning from the club? They no longer have any interest in it. The thing I’m concerned about is if you had this thing for how many years? You said 50

Guest: it’s about 58 years or so.

Brian: Oh, how many former former members out there that when they hear they’re going to be sold are going to say that they never dropped out. They, they’re still members. You know what I mean?

Guest: Yeah. Well here, here’s the deal. When you, when you join the club, it cost you two $3,000 to join the club. When you leave the club, pay you off. If we give you $2,000 to leave the club, I mean not only they’ll, they’ll write a letter saying, I’m terminating my membership in this club and say, okay, with then we paid that person $2,000 in the route.

Brian: You know what I think you guys should do if have you contacted the lawyer other than us by now?

New Speaker: Uh no.

Brian: All right, so listen, what you need is you need a lawyer that really knows the corporations security act in Michigan and the only guy I can think of that is really top flight. In fact, he’s one of a, one of Crain’s top 100 lawyers in the state of Michigan. Our good friend Scott Decius. He’s a Scott Decius. He’s in our office. Did you get Percy your phone number and your name?

Guest: Yes, I did.

Brian: All right, so listen, I’m going to give Scott your number. He’s going to call you sometime this week and he will sit down and figure this out. If he can’t figure it out, it’s not figure-out-a-ble. Okay.

Guest: Oh really?

Brian: Yeah, he’s really, really tough light. So when you talk to him, tell him that a, you called it a law show and that Brian and Justin told you to get in touch with him. He’s going to call you and you’re going to be in good shape. Where is the property?

Guest: It’s in the northern part of Michigan, near Near East Jordan.

Brian: So I’m assuming it’s a hunting club, right?

Guest: Yeah, it’s a hunting club. It’s a snowmobile club. It’s a hiking club. I mean all these different members do different things. Most of the members are hunters, but we do have snowmobilers in there and we have guys just to go up there and, and kick back.

Brian: How many, how many members?

Guest: 10.

Brian: 10. All right. Well listen, you’ll, uh, you’ll a appreciate speaking with Scott. I’ll make sure he gets in touch with you on Monday or Tuesday. Okay.

Guest: Thank you. Appreciate your time, sir.