Introduction to Dojo Legal Formation

Looking to start a Kendo or Iaido Dojo or club? There are several important legal steps to take in order to create one. The first and best thing you can do is to consult with someone who has a background in the formation of a legal entity. In this series of posts, we are going to walk you through our recommendations and, we hope to provide some guidance on what is needed to create a Kendo or Iaido organization.

About the Authors

Mark Kerstein and Shamina Chang are attorneys at The Law Office of Mark A. Kerstein, based in Houston, Texas. They instruct and practice Iaido and Kendo at the Houston Kenshikan, LLC, a 501(c)(3) non-profit organization. They have helped create legal entities for several Dojo, as well as have helped those organizations achieve 501(c)(3) status.

Dojo Formation Checklist

Here is a step by step checklist for what we recommend to start a Kendo/Iaido Dojo:

1. Register with the State.

2. Register with the federal government.

3. Open a bank account.

Detailed Steps

1. State Registration

   1. Pick a name.

   2. Search the name database for your state that registers companies or corporations and confirm the name is available to use (in Texas, this is the Secretary of State’s Office).

   3. Fill out the necessary forms to register a legal entity with the state agency that performs this function (in Texas, this is the Secretary of State’s Office). We recommend an LLC, a Limited Liability Company.

   4. File the filled out and executed form with the proper agency and pay the filing fee (in Texas, this is $395).

   5. Once properly registered, the state agency will send you a Certificate of Formation or a similar document.

2. Federal Registration

   1. Obtain an EIN for the newly formed entity for free. The Employer Identification Number can be obtained through the IRS.gov.

   2. Apply for tax exempt status as a 501(c)(3) non-profit organization. The IRS website has a guide here. You may be eligible to apply with Form 1023-EZ, the streamlined application, so make sure to go through the Eligibility Worksheet. The fee for Form 1023 is $600. The fee for Form 1023-EZ is $275.

3. Bank Creation

   1. Draft a "Banking Resolution". Essentially a letter signed by the LLC’s President/Manager that states that the Dojo will use XYZ Bank.

   2. Open a bank account using the Bank Resolution, a copy of the Certificate of Formation, and EIN.

   3. Some banks may waive fees if you have the confirmed non-profit designation.

Why All of These Steps are Important

Taking these steps will help everyone involved by protecting the instructors and seniors from liability and reduce any tax burden. State registration enables the Dojo entity to operate so that you don’t have to personally do things like rent space. Making the Dojo an LLC is the easiest way to manage an entity, less formalities are required compared to other entities. Opening a bank account for the Dojo means you won’t have to mix Dojo money with your personal money. Keep in mind, doing all of these steps are important. If you decide to only do some of these steps, you may be open to liability and responsible for taxes.

Conclusion of Part I

In this post, we went over a checklist on the legal steps for creating a Dojo. In the next post, we will dig deeper into these considerations. If there are any questions, please do not hesitate to contact us.

Disclaimer

Finally, please understand, we are not your lawyers and the contents of this post are not legal advice. This is a very basic guide and meant to inform based on publicly available information. We can, and have, helped people form entities in a number of states and can assist with the process, but to do so we would need to enter into an attorney-client relationship. Nothing about this post creates that relationship.