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Subject: How do I form a new HOA
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CherylM1
(Arizona)

Posts:1


08/12/2006 2:42 PM  
My husband and I purchased a lot to build a custom home. There are only 9 lots and at COE everyone had to give $300 to be put into a "well maintenance" fund. We have 2 wells that are shared. Now that all the lots are sold the title co. wants us to form the hoa and take the money from them. This is all new to me so I guess I would like someone experienced in this to give me a checklist of things I will need to do to start the process. People are telling me I need a tax ID number but to get that you have to be a corporation so do we need to file those papers as well? Do we have to register a HOA name for the tax ID number to be filed under? We dont have any monthly fees right now but the 9 of us have decided we will be putting money in the account every 6 months to build it up so we have it in case of an emergency. The only thing that HAS been done are the C.C &Rs and the deed restrictions & well agreement have been recorded but other than that nothing-it rests soley on us to form this. Please help!
JosephW
(Michigan)

Posts:882


08/13/2006 2:31 PM  
Go to your state's corporation division web site. There will be instructions on how to form a company and to check on potential company names. Next, select an attorney and CPA to help you file them correctly and to select the best corporate form for you to take (pick the wrong one and you could face unintended tax consequences). I know no one likes spending money on attorneys, but if you do this wrong, it usually takes a lot more money undoing it and then re-doing it right.

The corporation papers will have to not be in conflict with the CC&R's, so the attorney and CPA you select should be ones that know about HOA's.

When you have your corporation papers, then apply for a Federal tax ID (the attorney or accountant can do it). Yes, you will have to file tax returns every year, as well as corporate annual reports, but if done right, you shouldn't owe any taxes and the report filing fee should be minimal.

Have the attorney make sure that the agreement to put money in for ememrgencies is written into the CC&R's. The fact that the original owners have agreed to it doesn't mean future owners will if they don't have to.

Once this is done, you're going to have to elect a board and hold meetings (at least once a year) to meet corporate requirements.

Joe

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CharlesW1
(Georgia)

Posts:826


08/21/2006 7:06 AM  
CherylM1,

I don’t have any good advice. I‘m learning all about HOA’s with every post I read. I do have a couple questions. I think may help others to give you some good advice. First, do you have any amenities? Second are your streets private or public owned? Third, Do you have a budget written out, showing all the current expenses?

I hope you receive responses to all your concerns.

Best of luck to you
Chuck W.

Charles E. Wafer Jr.
JanM
(Texas)

Posts:142


08/21/2006 12:06 PM  
Why, oh WHY would you want an HOA with 9 lots???
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