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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

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Legal Guide Pg5

  • 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