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:
- The liability of the
members is limited (for example, members are not personally liable for
debts of the corporation);
- Continuity of the
organization is assured while the membership changes;
- A corporation can own
property in its name regardless of membership change;
- The ability to bring a
legal action in its own name (an unincorporated body cannot); and
- 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.