Why incorporate a non-profit organization?

Why incorporate a non-profit organization?

Incorporating gives an organization legal status. It is not essential for a non-profit corporation to incorporate. Whether an organization decides to incorporate or not depends upon its activities, nature, or type of organization.

As a legal entity, an incorporated association is recognized by the legal system as having rights and responsibilities. An incorporated organization can enter into contracts, buy land, borrow money, have bank accounts, etc., in its own name. Other advantages to incorporating may include:

  1. The liability of the members is limited (for example, members are not personally liable for debts of the corporation);
  2. Continuity of the organization is assured while the membership changes;
  3. A corporation can own property in its name regardless of membership change;
  4. The ability to bring a legal action in its own name (an unincorporated body cannot); and
  5. The chances of receiving government grants may increase because of the stability the organization appears to have.

An unincorporated association is an agreement between individuals, and generally has no legal status. The members may be personally liable to the creditors for the full amount of any debts. An unincorporated body cannot generally sue or be sued; members must sue or be sued personally. Title to property has to be in all the members’ names if the group is not incorporated. This can make selling the property difficult.

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