Wednesday, January 05, 2011

Racing - What It Takes (Kind Of) To Form A Team

Around this time of year more than a few racers start thinking along the lines of, "You know, I could just do my own club instead of dealing with -fill-in-the-blank- that's happening at my current club."

It may be a new thought (instigated perhaps by the email going out that says what the club expects from its riders for this upcoming year) or it could be a festering one (instigated much earlier, perhaps at some race in June where the individual thought something the club did could have been handled differently).

Before I go any further I should clarify that the club is the organizing body of a group of people, sort of. It's the "corporate name" if you will. The team is the sponsored name. In the old days the club had to be amateur (no company names). So the 7-Eleven amateur cycling team was the team that belonged to... the name escapes me but I think it was the Southwind Velo Club or something like that.

Nowadays a large club may have many separate teams. In this area the New York City club CRCA (Century Road Club Association) has a gazillion "teams", usually listed as "CRCA/Team", i.e. CRCA/TeaNY or CRCA/Radical Media (where Columbia pro Evelyn Stevens got her start).

Anyways, that's the club and team thing. You have to have a club before you can have a team so I'll just refer to the "group" as a club going forward.


Why would you want to form a club?

I can think of a few reasons:

- You and a few of your close friends who happen to race with you in your category and age group (if applicable) want to race together in a separate kit. Perhaps you all do rides together but have never raced. Perhaps you're used to running organizations so it's no biggie to start a new (small) one. Usually a driving idea is to identify to others that you all are associated in some way.

Look, there's something to be said for matching kits at a bike race. A lot of people (me included) like being in a group. You support the group, even if you don't really "belong" to it. If that wasn't the case then the Yankees wouldn't be able sell a single baseball cap. After all, just because you buy one doesn't make you anything more than a proud owner of a Yankee cap. I don't own a Yankees cap but I'm using them as an example because I think they're the best marketed baseball team in terms of money.

- You want to spend some of your business's marketing money and you think it'd be cool to put it on the kit you wear at races. Or your boss wants to help you out and give you money towards your club. Both of these applied to me in the past. And many teams have made it because of this. The big pro teams Phonak (what used to be Phonak) and currently BMC exist mainly because of Andy Rihs's passion for bike racing. Locally many clubs exist simply as a vehicle for one of the member's business. A good example? Bike shop clubs.

- You think the current club isn't doing things the way you think they ought to be done (you a politician? That's what all "challengers to incumbents" think). Whether you're right or wrong is besides the point. You just want to give it a shot, do it on your own. It could be as minor as buying different socks or as major as holding an event. It's very hard to find a large group of strong-headed and individualistic thinking racers that get along well. I run my own promotion club and it's always been mine, so I can say that about people who start and run clubs.

I can't think of any others at this point but feel free to pipe up if there's another couple few reasons for starting a club.

I think a central concept behind ALL clubs is that they want to have their own kit, their own uniform. The Yankees play in their uniform, even though it has no real advertising on it. The uniform itself is the commodity. In cycling the kits get covered with advertising, so your classic Festina jersey from 1998 still advertises Festina Watches every time you wear the jersey on a ride. A grey shirt with "Jeeter" on the back of it doesn't do much for some, will infuriate others, but won't advertise specifically for a particular company (like, say, Festina Watches).

Therefore the kit is key.

This is where USA Cycling gets you. They understand this kit obsession. Everyone does.

According to USAC rules, if you want to wear a kit it needs to belong to a club. You can't go out and race in your classic Festina Watches jersey, no more than I'm allowed to go out in my Mapei one.

Well, technically I'm not supposed to, although I raced much of a particular season wearing Mapei shorts. But that's a whole different story.

If you want to wear your kit it needs to be connected to a club. Some officials will make you wear a plain kit if you're officially unattached. I've seen a lot of racers that have raced with their jersey turned inside out because of this.

And, here's the kicker.

If you have a club it needs to hold a race.

If your club does not hold a race, it cannot renew its club registration the following year.

Of course there's a workaround to registering a team. You can register using a different person, different address, and different club name each year. Since many race rider lists whatever you put as the team, the club name can be just remotely related from one year to another.

For example I belonged to a team based in the Silvermine area of... Norwalk? New Canaan? Because we effed up for a few years we were Racing Team Silvermine one year, RTS another. Heck we might have been RT Silvermine another year. We would screw up a year, change names, then be okay for a year, then we'd have to change our name again, etc. One year we weren't a team at all - I raced in a plain blue jersey that year (1988 I think - that's when Carpe Diem Racing originally started, and it existed by helping out with races, promoting a 'cross race, a mountain bike race, and, finally, the Bethel Spring Series in 1992).

(To give credit where it's due, I did NOT organize those races. Mike H did, and he's half the people that thought of and made the Bethel Spring Series a reality. Rit G is the other half. I only helped out until the end of the 1992 Series.)

You can make the club a business (LLC or something). Heck you should do something just to cover your butt in terms of liability. But as far as money goes, if the sponsor needs to write a check to a club, you need to have a club legally, as in government-wise.

Don't worry as much about taxes. As long as the money going in and out is about the same you'll be even steven money-wise.

With an LLC you don't have to prove non-profit or even not-for-profit. The minimal taxes you pay will be painless, maybe the cost of a few tubular tires. The rest of the costs are costs and can be deducted. I think I paid about $400 to set up my LLC, and that was with my very risk-averse-self hiring a lawyer to write up some document for the state (it describes my LLC's business).

The other way you do it is you connect the club to a current business, like a bike shop. But then you get into some potential conflicts and stuff.

I haven't tried to get the business side to help my hobby side, but after running a few simple ideas past my wife (the accountant, and she's on the up and up) she says that there are ways I could conceivably write off some of my bike expenses as related to the promotion business. I'd have to do some extra work (promote stuff using my hobby) but it'd be pretty straightforward. Since I'm of the mindset that taxes aren't necessarily bad I haven't started to plan on this aspect of cycling.

Anyway my point is that setting up an LLC would be pretty easy and allow you to receive sponsor checks. If you use all the money, minus some seed money for the following year, you'll be good. You can even sponsor/seed your own LLC - it's where I personally put 3? pairs of HED wheels worth of money (and no I haven't seen it back yet).

With an LLC income is treated like personal income. You file a Schedule A for your expenses or something like that (ask a good accountant - I can give you a contact if you need one... just remember that accountants bill by the hour). Keep a good record and make sure your income>expenses (for the LLC) so that the IRS doesn't get on your back.

Remember, it's not a business if it loses money all the time.

So, yes, you can just register a club with USAC and race in your kit (with your club name on it somewhere). It'll cost just $150 a year to register your club, at least for 2011. You'll be listed as your club, not unlisted. If you don't hold an event you can just do some finagling to get a new club name next year.

But for now you'll be able to wear your kit in races. And since it's your club you probably should wear it when you train too.

Isn't that so cool? So pro?



Mrs SDC, accountant said...

A single member LLC's income gets reported on a Schedule C, not a Schedule A. A Schedule C's net profit is subject to both income tax and self-employment tax.

A multi member LLC's income is reported on a partnership tax return, Form 1065. It then flows from there onto your personal Form 1040. The net profit is then subject to both income tax and self-employment tax.

Aki said...

What she said :)

spokejunky said...

USAC allows clubs to do 'training rides' and 'maintenance classes' in lieu of promoting a race. This is a lame cop out, but I can see a new club's opinion on how difficult it is to get $$ for a race. Having said that I've yet to live in a town who doesn't have an established cycling team or one that is within an easy drive. If you can't put up the $$, then join another established club until you have the means to do your part. I know we are a knuckle-headed lot, but keep on with not supporting a new or established race and see your drive times get longer or options go away altogether.