Board members often spend a lot of time and effort on behalf of their association, so it's natural to assume that they should receive something in exchange.  Offering pay or a discount on assessments may also seem like a good way to encourage owners to serve on the Board.  However, compensating Board members could in fact be prohibited by your Declaration and By-Laws and opens up a host of other factors to consider.

Owners should first consult their governing documents to determine if they allow for the compensation of Board members.  Most Declarations specifically state that Board members are to serve without compensation so it's more likely than not that your Board members are required to serve on a volunteer basis.

If your governing documents allow for the compensation of Board members, your association may be required to obtain Workers Compensation insurance in addition to other required insurance policies.  If a compensated Board member is injured while carrying out their Board functions, the claim may not be covered by the association's general liability policy.  This leaves the association open to liability in the case of an injury.

Further, any compensation paid to a Board member in excess of $599 annually must be reported to the IRS as taxable income.  A 1099 should be provided to the Board member and filed with the IRS.  For smaller buildings, this means additional accounting expenses to properly report the compensation.

It's important to note that offering compensation for Board members could prompt owners to serve for the wrong reasons or to regularly grant themselves "raises" that are not in the best interests of the association.  Overall, maintaining a volunteer basis for your Board members is the safest way to go. 

Banks are pushing debit cards more and more lately, and there's good reason for that: they generate fees for the banks without the liability of fronting users the funds.  The cash comes right out of your bank account and the bank collects an easy percentage on your purchase at the expense of the merchant.  Debit cards, particularly those with a Visa or MasterCard logo on the front, may be a convenient way for users to access cash in their bank accounts, but they are NOT ideal for condominium association accounts.

Convenient, easy access to cash.  Great for individuals, potentially devastating for a condo association.

A lost card can easily be used by the wrong person to drain an association bank account.  A card held by an unethical or criminal Board member can be used indiscriminately for unapproved expenses or personal use.  While owners may not want to believe Board theft happens, HausFS knows that it is a reality. Further, no member should have the right to make purchases that have not been specifically approved at a prior Board meeting.

Association funds belong to ALL owners.  Don't make them an easy target.  Ditch the debit.

While every condominium association is a community, the underlying structure is also a non-profit business.  For that reason, the principles of small business apply to every condo association.  And certainly, conflict is a reality for condominium associations.  Tomi Wahlstrom of Otavala Consulting explains why managing conflict is important for any business..

Every business that employs people regardless of size and industry experiences interpersonal and organizational conflict. This conflict is caused by multiple inter-related variables and circumstances. For example, some of these causes include constant changes in the competitive environment, increasing diversity among employees, and limited resources. As a result of these changing variables managing conflict is important in many ways. First, it is important because unmanaged conflict can have expensive legal consequences as people seek litigation as a way to resolve disputes. Second, managing conflict is important because

John and Jane Dover, a married couple, live at 1234 W. Chicagoland St. 

John Dover's name appears on the warranty deed for the property, Jane's does not.

John is the President of his 6-unit association, while Jane serves as the Treasurer.  There are three Board members total.

What's wrong with this picture?

John and Jane cannot serve on the Board together for two reasons.

Tax returns for condominium associations are due March 15, 2010.  EVERY association is required to file a federal Form 1120 or 1120-H.  Associations with federally taxable income must also file an IL-1120. 

Your association is a business, treat it accordingly.  That means filing your income tax returns every year!


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