The unincorporated association form is usually chosen when a number of individuals agree or 'contract' to come together for a common purpose - which may be of a social nature.
How unincorporated associations operate
Unincorporated associations are relatively straightforward to run and cost nothing to set up. They make their own rules for running the organisation and set these down in a democratic constitution. A management committee is elected to run the organisation on behalf of the members (if it has any).
Unincorporated associations do not need to register with or be regulated by either Companies House or the Financial Conduct Authority - they enjoy greater freedom of operation than a company. For example, they don't have to submit annual returns.
If an unincorporated association's objects are exclusively charitable and those objects are for the public benefit, the association should apply to the Charity Commission to be registered as a charity. All charities must follow the requirements of charity law, and most registered charities must also submit annual returns to the Charity Commission.
The Department for Communities (DfC) provides guidance on setting up a charity in the voluntary and community sector.
Unincorporated associations and personal risk
Unincorporated associations have no separate legal identity. This means that their members will have to sign loans and contracts as individuals and carry the risk of personal liability.
This form is unlikely to offer a long-term solution if you intend to sign contracts or expand the enterprise. You should consider incorporation if you intend to:
- take on employees
- raise finance, apply for grants or open bank accounts
- issue shares
- enter into large contracts
- take on a lease or buy freehold property
This should help you to gain access to a wide range of financing sources that will not put your personal assets at risk. The Northern Ireland Council for Voluntary Action (NICVA) provides further governance and charity advice.