Being unincorporated means that the organisation has no separate legal identity and all the risks and liabilities that are involved in running the organisation are taken on by the individuals that run or manage the organisation. Unincorporated organisations are normally:

Sole Traders – are individuals who set up a business on their own and are solely responsible for the business e.g. self employed plumber, taxi driver, consultant. There is no requirement for a constitution or registration

Partnerships - are relationships between persons carrying out a business in common with a view to making profit. There is usually a written partnership regulating its affairs. There are no requirements for registration.

Unincorporated associations – are a group of people that join together for a particular purpose e.g. sports clubs, hobby clubs etc. They have a constitution and a board of elected members that run the organisation on the members’ behalf. There is no registration requirement. If a social enterprise decides to be unincorporated this tends initially to be the normal structure

Charities can be unincorporated but are subject to specific charity law that encourages being incorporated.

Benefits of being unincorporated

• Allows greater freedom of operation
• Less red tape is required.  Unincorporated organisations only need to comply with normal statutory business obligations of VAT, PAYE, Health and Safety, and insurance
• Tax Advantages – Sole traders pay tax in arrears and this can help with cash flow.  There are reduced National Insurance contribution for owners who are regarded as being self employed

Disadvantage of being unincorporated

The main disadvantage of being an unincorporated business is that all owners/stakeholders are fully responsible for all the organisations debts and obligations.

If the organisation is planning to do any of the following then serious consideration should be given to becoming an incorporated organisation:-

• taking on a lease
• buying  property
• taking on employees
• raising finance
• entering into large contracts
• charity status