This document discusses the risks and benefits of incorporating an organization versus keeping it unincorporated. It notes that risk of personal liability is one of the main reasons an unincorporated organization may seek incorporation. Some situations that carry particular risk of liability include large contracts, loans that may need to be repaid, employing others, and leasing or buying property. However, it also lists other factors to consider in determining the best legal structure, such as regulations, the organization's stage of development, and tax advantages. The document then briefly defines limited liability as meaning the liability is generally that of the organization itself rather than the individuals involved.

1. remain personally at risk, particularly if the funds of the organisation are not sufficient to
cover its liabilities.
From this it will be seen that risk (and the benefit of limited liability) is one of the
principal reasons why an unincorporated organisation may seek to incorporate or that
incorporation is sought from the start.
Risk may arise through any of the activities of an organisation but those who carry the
risk of liability should be particularly concerned, and take appropriate advice in any of
the following situations:
• large or unusual contract;
• loans or other funds which may reqwre re-payment e.g. claw back 10 service
contracts;
• employing others; or
• leasing or buying property, especially if It IS subject to any borrowings e.g.
mortgage.
However there are other reasons which will help in determining which legal structure is
more appropriate to an organisation such as:
• the level of regulation, including disclosure;
• the stage of development of the organisation, where there IS perhaps little
likelihood of personal liability in the early stages;
• tax advantages, which fall outside the remit of this Guide; or
• status or perhaps more likely the perception and requirements of others, such as
funders and potential investors.
Limited Liability
It is likely that you have heard about 'limited liability', but what does this mean? As
already noted an organisation with legal status can contract in its own name and has its
own assets and liabilities. This means that, generally, any liability is the liability of the
A Guide to Legal Structures for Social Enterprise © Wriglers Solicitors LLP Sept 2009 (mjl) 4