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Unincorporated Associations

Unlike a corporation, which must be created and structured according to the directives of state law, two or more people may form an unincorporated association without following those formalities. Those who form an unincorporated association may choose how the association should be governed, which is one of the benefits of this form of entity. Such an entity may be formed as a nonprofit entity.

However, whether those associated with the entity are liable for the entity’s debts is not clear. In several states, including those that have adopted the Uniform Nonprofit Unincorporated Association Act, an unincorporated association is treated as an entity separate from its members. Where a state recognizes the association as a separate entity, then the members of the entity are probably shielded from personal liability for the association debts. On the other hand, some states may not recognize the association as separate, meaning that the members could incur personal liability.

Inside Unincorporated Associations