Ray Newman and his team at Becker & Poliakoff have thoroughly reviewed the options for The Seaside, FL Homeowner’s Collection. We will gladly provide a copy of the Memorandum outlining the formal legal opinion to any interested party. The following information provides a high level review of the options explored and the ultimate recommendation.
The central goal of the corporate entity is to enable Homeowner’s in Seaside, FL to have a rental management agency that they control and share in the profits. To accomplish this goal, the professionals, both legal and tax, had to decide how the entity would be structured to best accomplish the goal in the most practical and efficient manner.
While it was important to research and assess all possible options, the end result was what may have seemed obvious all along. The Seaside, FL Homeowner’s Collection will organize as a for-profit corporation under Chapter 607, Florida Statutes. While the concept did have some characteristics of a cooperative, it does not fall within the gambit of the Florida cooperative entity statuses generally found in Chapters 618 and 619, Florida Statutes..
There are three primary practical issues that must be addressed as part of the formation of the corporation.
How does a person or entity become a stockholder?
The Homeowner’s Collection will issue stock at a nominal price to be determined at a later date.
About the Stockholder Agreement
How can The Homeowner’s Collection force an owner to sell his, her, or its shares in the entity if that owner conveys the property or the rental management service or decides to no longer rent? As a condition to purchasing stock, the purchaser will have to execute a stockholder agreement. This agreement will contain a prohibition against the stock being assigned or otherwise conveyed or transferred. Additionally, it will contain a mandatory buy/sell agreement provision that would automatically go into effect when an owner decides to transfer his, her, or its property or take the property off the rental management program.
What formula will be used to distribute profit?
As a prerequisite to becoming a stockholder, an owner must have its property on the rental management program, and there will be a percentage split and monthly disbursement just as if you were renting through any other traditional company. The percentage retained by the Homeowner’s Collection will be used as operating funds in the same manner companies use them under the traditional rental management model.
At the end of each calendar year, the profit less any necessary retained amount for operational purposes will be distributed to the stockholders. The current formula being considered is the gross amount of room revenue generated by the stockholder’s property divided by the gross amount of room revenue generated by the Homeowner’s Collection as a whole. The percentage extracted from that calculation would represent the percentage of annual profits due to the stockholder at the end of each year.
The other corporate set-ups considered by the legal team included a Cooperative as noted above, a Not for Profit as represented in Chapter 617, Florida Statutes, and a Municipal Public Works entity represented in Chapter 180, Florida Statutes. While all of these possibilities had merit, ultimately there were fundamental flaws with each when applied to the ultimate goal of the Homeowner’s Collection.