Q: My son has played hockey for several years with the same group of kids. Recently, the parents decided to organize an AAU team. What issues should we look out for when forming the team?
A: A lot of the issues involved in forming a sports team are the same in forming any business entity, and there are just as many different varieties of each. For example, each Major League Baseball team is a separate entity, while Major League Soccer and every team in the league are organized as a single limited liability company.
Basic new-business issues include choice of entity (non-profit or for-profit; limited liability company or corporation) and governing personnel. And your team will have the same negotiation issues that impact most new businesses, such as contracts that request guarantors. It is not uncommon for would-be contractual partners to ask for guarantees from individuals associated with a new business. You and your fellow parents should discuss whether anyone is willing to make such guarantees.
However, there are other concerns that are unique to sports teams, particularly a team’s relationship with its league. This is likely the most important initial consideration. The rules of the league you join will dictate many of the decisions you make regarding the team, including some of the standard business entity decisions. For example, AAU leagues frequently require teams to be non-profit business entities. Make sure you’ve looked into a league’s entity requirements before formally organizing the team.
Additionally, AAU leagues vary regarding entry fees and their policies permitting member teams to exit. How will your team pay fees? Is your intent to form a team that will exist only for the current group of kids, or do you hope to form a team that will exist beyond the current players?
Further, look at how decisions are made within each league. Some are governed by representatives from each member team while others are governed by the managing office of the league. You and your fellow parents may not want to be involved with the minutia of league decisions, but you should at least be aware of how those decisions are made.
Importantly, discuss insurance with each league you approach. Some offer it, while others do not.
John Weaver is an attorney in the Corporate Department of the McLane Law Firm and teaches sport law at Southern New Hampshire University. He can be reached at [email protected].
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