Charities and non-profits are often faced with the question of whether to incorporate. The simple answer is this: prevention is the best medicine. While members may have the best of intentions, a lack of forethought can have catastrophic outcomes. Any charity or non-profit organization that exists as an unincorporated association is well-advised to ensure that their governance protocols are clear and should consider the benefits of incorporation. Such forward thinking will pay off in the long run.
Unincorporated Associations
It is not unusual for startup organizations to be attracted to the concept of an unincorporated association, since unincorporated associations require little effort to form and are less costly to run than corporations. Further, it is not uncommon for people to form an unincorporated association without even being aware of it. A group of individuals can form an unincorporated association simply by coming together and engaging in activities in furtherance of a common goal or for the benefit of an ostensibly defined group. Unincorporated associations include non-profits, such as golf clubs, social clubs, and neighbourhood associations, but can also include registered charities, comprising of members who seek to further a common charitable mission.
There are two main benefits of carrying on business as an unincorporated association: (1) their structure is flexible, as they are not governed by a statute; and (2) there are no statutory filing obligations. It is not unusual for small associations with no property to remain unincorporated for many years. However, an association that has a large membership or that wishes to generate revenue and hold property should consider incorporation. While incorporating and attending to statutory filings may appear burdensome, the efforts may be well worth their cost.
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