What is an ‘unincorporated’ group?
An unincorporated group is legally understood as a collection of individuals. This means that an unincorporated group has no legal identity outside of the people who are on its management committee.
As a result, the members of an unincorporated group are personally liable for the group’s actions. If you are part of an unincorporated group, you should be aware of this liability and carefully assess the risks you face.
Unincorporated groups cannot enter into contracts in their own right. Instead, a member must enter the contract in their own name.
An unincorporated structure is most appropriate for groups which:
- Have low incomes
- Do not intend to employ staff or acquire property
What is an ‘incorporated’ group?
An incorporated group is legally understood as a group which has its own legal entity. In other words, incorporated groups have legal standing that is similar to that of a person.
This means that members of incorporated groups are not personally liable for the group’s actions. It also means that the group can enter into contracts in its own name.
Incorporated structures are most appropriate for groups which:
- Intend to trade or raise large sums of money
- Intend to enter into large, legally binding contracts
Incorporated vs unincorporated at a glance
This table summarises the key differences between incorporated and unincorporated groups.
|Liability and risk
|Members are liable for the group’s action, may have to meet debts and any legal action against the group will, in reality, be against members themselves. This means members may take on significant risk.
|Individual liability is limited and risk for each member is reduced.
|Unincorporated groups cannot enter into contracts or own property in their own right.
|Incorporated groups can own property and enter into contracts in their own right.
|Low or limited start-up cost.
|Incur annual and start up costs to create and run the group. How much fees cost depends on type of incorporated structure.
|Not regulated by any legal body (unless a registered charity).
|Regulated by at least one, possibly two, legal bodies. This increases administrative burden and requires more of committee members.
Get Help Deciding
If you’re not sure whether you should be incorporated or unincorporated get in touch. We’d be happy to help.