May 17, 2005

What is an Unincorporated Association?

Before you decide to start yet another non-profit, check out this guide that's up online. I'm sure that I'll have more to write about this in the future... but till then, happy reading!

What is an Unincorporated Association?
[Note: I found this on the web, but have to find the actual URL for it.]
A non-profit unincorporated association is any grouping of persons (i.e. a collective, an activist organization, etc.) uniting together for some special purpose or business other than making a profit. Most states will grant tax-exempt status to an unincorporated association or club, you will have to contact your state government to get information about applying for it. However, if you just take out a non-interest bearing account at a bank or credit union (i.e. a checking account) you will not have to file taxes for your association and, therefore, you can avoid dealing with the government at all. The main differences between an unincorporated association and a non-profit corporation is that the members of an unincorporated association can be held directly liable if someone were to sue the association and it is problematic for unincorporated associations to have paid employees.

In contrast, non-profit corporations, in just about every sense, are corporations, with the exception of making a profit and have the legal protection of limited liability, which protects the corporation's directors from being held legally responsible for any legal action directed at the corporation itself.

Five alternatives to starting a nonprofit:
1. Study the list of nonprofits already active in the same area and join their efforts as a volunteer, a board member or even as staff.

2. Analyze the list of nonprofits already active in the same area, identify the three most compatible with your ideas, and meet with them to explore creating a special project or initiative -- and negotiate your involvement.

3. Explore the list of national organizations in the area of your interest, and see if a local chapter is needed in your geographic area.

4. If your effort will be quite local and small, consider forming an unincorporated association or club -- have meetings and activities but skip the reporting requirements (an option for groups with annual budgets under $25,000).

5. If you are considering creation of a group to finance activities or needs of others (scholarships, family emergency funds for a specific population, etc.), explore sponsorship of the fund by a community foundation or other organization.

From Delaware

1 comment:

someone else said...

This is excellent! Thanks!