As regular readers know, we strongly advise that flying clubs adopt the structure of a non-profit corporation in their state of operation, rather than an LLC or other legal entity. As we have captured in the brand-new edition of The Guide to Starting a Flying Club and in many previous Club Connector Question of the Month articles, there are many reasons for this, not least being liability protection and the establishment of a formal method of governance. Even of your club is organized a bit differently, say, as an LLC or even a loose association, having a clearly defined charter, sometimes called a constitution but more often referred to as bylaws, will provide structure for the modus operandi of the club, its directors, officers and members. We talk a lot about bylaws and their contents elsewhere, but let’s agree here that the need for meetings is an important part of any organization that shares assets with equally vested members, and so there should be a section in the bylaws that defines the types of meetings, requirements for the minimum number of members present, voting methods, and so on.
If we consider the different types of meetings a well-run club may hold, it quickly comes down to a short list:
Holding an annual general meeting is a major component of good governance for flying clubs, but it may also be a requirement for continued “in good standing” status with your state’s business bureau. It is worth revisiting your state’s business website to recall what is expected of you. You will have uploaded Articles of Incorporation (Articles of Organization for LLCs) or some other statement of purpose when you first established the club, but there were very likely additional expectations, such as the requirement to elect a board of directors (and/or officers) and to hold at least one corporate meeting per year—that being the Annual General Meeting. Revisiting these expectations/requirements is particularly important if you engaged the services of an attorney to establish the club’s legal status—you (specifically, the club’s president and treasurer) may not actually know what the state expects of you in order to continue to be “in good standing” on an annual basis. It is also a good idea to revisit this when board of director positions change hands—you don’t want something like this getting lost in the handover.
According to Investopedia, “…an annual general meeting (AGM) is a yearly gathering of a company's interested shareholders. At an AGM, the directors of the company present an annual report containing information for shareholders about the company's performance and strategy. Shareholders with voting rights vote on current issues, such as appointments to the company's board of directors, executive compensation, dividend payments, and the selection of auditors”.
So, in the case of a flying club, the board (and/or officers) report out to the general membership (loosely, “the shareholders”) about the club’s operations, performance and strategy for the coming year. This is where the year-long slog of good record keeping suddenly becomes worth its weight in aviation equipment as board members will draw heavily on last year’s data, so be sure that directors (especially the Treasurer and Secretary) use appropriate methods and tools to capture the information is a lasting way. Don’t be tempted to use scruffy bits of paper—they will get lost!
For example, the Treasurer should employ a solid financial system to keep the books, file and pay the taxes, file the annual report and, depending on the state, a property tax return. You don’t have to use professional accounting software (although it can make the Treasurer’s job easier), but at least use a spreadsheet to capture month-by-month income, expenses, bills, sales tax, etc.
Similarly, the Secretary should keep records of the agenda and minutes of all meetings. Minutes don’t need to be word-by-word narratives of a meetings but should at least capture time of the call to order, members in attendance, members offering apologies for nonattendance, key take-aways from the meeting (especially financial numbers), a record of all formal motions, including the proposer and seconder, and the results of the vote on the motion, including the number and the actual names of the ayes and nays, and then the time of adjournment. Without doubt, there will come a time when someone questions a past decision or action, and being able to quickly point to the meeting notes is very useful to assuage the situation.
We also strongly suggest that club records are stored/uploaded to “The Cloud” for data retention and security. The risk of data corruption and hacks are omnipresent, so having—and using—a backup strategy is essential for good governance.
We are often asked, by new and mature clubs alike, about what records should they keep, for their own use, as well as in case of an audit. We wrote about this in “Ramp Check for Clubs” , which is worth rereading in the context of this article. Now, it is unlikely (but not unheard of) for the state or FAA to want to see documents, but it is more likely that the IRS and/or airport manager may “ask” to see club records. Given that all clubs must file tax returns of some sort, even if the club is tax exempt (and don’t confuse being registered as a non-profit corporation with your state as automatically being tax exempt in the eyes of the IRS), then there is always the chance that you win the IRS audit lottery. Being consistent with your returns will probably reduce the chance of an audit, so be aware that a change of Treasurer and reporting methods could be a trigger. As we have written about before, the position of Treasurer is the most critical and exacting in any club and is why the position doesn’t change hands as often as other director positions. This has two ramifications. Firstly, ensure that the current Treasurer is using a documented and available system, and secondly, that any change in the position be accompanied by a phase-over period to ensure continuity. Be alert when elections at the AGM favor a change in Treasurer—the hand-off must involve great diligence.
Steve’s club is going though this very process in early 2022. He has been Treasurer since the club’s inception but at the AGM in mid-January, he relinquished the financial reigns to another club member. The accounting system has evolved a lot over the years and now takes a 30-page document to explain its nuances and methods for the new Treasurer. Steve’s advice? Don’t wait for the change of position to be imminent and ensure (now) that current Treasurer has everything documented. We plan to run a series of Question of the Month articles in the near future, where we’ll look at the roles and responsibilities of board and officer positions.
It was mentioned earlier that the airport manager may well ask to see the club’s books and records. This seems to be happening more frequently of late, so we’ll launch into why this is happening in an upcoming Flying Clubs Radio show. For now, be aware that the airport manager has every right to review the club’s records to ensure that it is operating as a true, non-profit flying club, and is not crossing the line between a club and a commercial operator. As a teaser to the new radio show, we have seen airport managers calling out “rogue” clubs, as well as some airport operators colluding with flight schools and FBOs to remove legitimate and correctly operating flying clubs. Using some British understatement, we are not happy with either of these situations.
From the above, you can see that the AGM is the culmination of a year of club operations and is the place—and opportunity—to not only satisfy official requirements, but also to inform and educate the membership on the present and future situation of the club. Here are some suggestions of what to actually do and include during the AGM in order to achieve these noble objectives. It is up to you to decide if you hold a completely separate AGM that is distinct from a monthly meeting, or whether you couple the AGM with a monthly meeting. Here, we’ll assume the latter. You can tweak and use this as the agenda for the AGM, as well as headings for the meeting’s minutes:
Finally, some other tips for AGMs:
By definition, the Annual General Meeting is a business meeting and impacts every club member. Ensure that you carefully plan the meeting, have all of necessary documents and reports ready well before the meeting and treat it as an opportunity to not only present to the members, but to listen to them.
As always, fly lots and fly safely!