Despite Law Firm's Advice to the Contrary, NJ Court Says Club Members Can Profit When Withdrawing From Nonprofit
"The club was not utilizing the COIs as income-generating or profitmaking instruments," an Appellate Division judge ruled. "The club has not presented books or other financial records that classify the monies paid by members for their COIs as the organization's income or profit."
October 27, 2023 at 04:19 PM
4 minute read
NGO and Non-Profit
Credit: Jo Ann Snover/Adobe Stock In a novel ruling, the New Jersey Appellate Division disagreed with legal advice given to a nonprofit club, instead finding that the club did not violate the New Jersey Nonprofit Corporation Act by allowing members to leave and recoup a higher amount of money than originally paid to join.
Steven Breitman joined the Atlantis Yacht Club, a nonprofit organization, for $7,500. When he went to withdraw as a member in 2015, he was eligible, under the club's bylaws, to receive a redemption of the certificate of interest he received on joining. After Breitman joined the club, it raised its membership fee to $25,000. The club's bylaws at the time authorized the payment of the new member's fee minus a $5,000 capital assessment, leaving Breitman with a $20,000 redemption, according to the opinion.
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