The term ‘unincorporated association’ simply means an organisation that is not a limited company.
People come together to form clubs, community groups, membership associations and charities all the time, primarily because they are passionate about what they do and want to share their knowledge, skills or time with others.
Is that the same thing as a Not for Profit organisation?
The UK government’s definition of an unincorporated association is “an organisation set up through an agreement between a group of people who come together for a reason other than to make a profit (for example, a voluntary group or a sports club).”
For this reason, organisations of this type are often also referred to as ‘Not for Profit’ organisations although other types of organisation can also be Not for Profit as it is not a legal structure in its own right.
You don’t have to inform anyone that you have set up an unincorporated organisation and there is no cost involved. However, if you want to set up a more formal organisation such as an affiliated sports club or a charity then there are additional requirements.
What are my legal responsibilities when running a Not for Profit?
While unincorporated organisations can remain very informal there are still potential legal responsibilities associated with running any type of organisation. Because unincorporated associations do not have the legal separation from the individuals running them that a limited company has, then the individual members are considered to be personally liable for any debts or contractual obligations.
This legal liability is held ‘jointly and severally’ which means that each individual could be held liable for the entire debt if the others were not able to pay, not just a proportion according to the number of members of the board, and this should always be considered when signing any contracts. There is also a risk that you could be held legally responsible for any claims brought against the organisation.
This responsibility should not be underestimated as debts incurred when running an unincorporated organisation can have an impact on your personal financial standing and even, in some professions, your suitability to hold a particular job.
In practice, however, the simplicity of the unincorporated structure far outweighs the risks in many cases, particularly where the organisation doesn’t have many outgoings, such as the need to hire premises or staff etc.
Use a formal constitution to avoid future disagreements
When working with other individuals there is also the potential that there will be different opinions on matters which arise in the course of running the organisation. To avoid problems later on it is good practice to formalise the structure of your organisation at the outset with a simple constitution setting out the aims of the organisation, the rules of membership and who has responsibility for what.
It is usual to form a management committee or board that are nominated by the wider membership to make decisions on behalf of the organisation. In very small organisations this may include the entire membership but it would be normal to allocate the formal post of ‘Chair’ at the very least who would normally be given constitutional powers to break a deadlock decision.
