Starting an unincorporated non profit organization
History and Background of unincorporated associations
Up till 1992, an unincorporated association was governed by common law and a combination of several state statutes. None of the state had dedicated laws governing unincorporated associations.
An unincorporated nonprofit organization was not awarded the status of a separate legal entity. It was considered as an aggregate of its constituting individuals quite similar to business partnerships.
This created many problems and confusions.
The association could not receive a gift because it did not have a legal existence. Some courts considered it as a gift to the constituent individuals while others proposed treating of association as an entity only for this purpose.
Unincorporated associations, not being legal entities could not sue or be sued in any court for the same reason. Not being a legal entity, all the members had to be joined as party plaintiffs or defendants. Some states amended their common laws to include the “Sue and be sued” clause to address this issue.
The question of deciding the personal liability of members posed another issue. Some courts started treating associations as partnerships and the members as co-principals thus making them personally liable. It was also noticed that in large associations not all members enjoyed the same kind of participation or control to be right to treat them as co-principals. At the other end, several states amended their common laws to excuse members of association from personal liability – thus going to the other extreme of treating them as corporations.
The association could similarly not be held liable in tort, contract, or otherwise for conduct taken in their names where as its members could be personally held liable.
Uniform Unincorporated Nonprofit Association Act (UUNAA)
Given all these confusions, the National Conference of Commissioners on Uniform State Laws (NCCUSL) drafted the Uniform Unincorporated Nonprofit Association Act (UUNAA).
The Act gives unincorporated nonprofit organizations the following advantages –
1) The associations can sue and be sued as separate legal entities from its constituent members.
2) The association now has the legal capacity to receive, possess, distribute or transfer property.
3) The associations have limited liability for tort (personal injury) and contract claims;
4) There is now a system in place for the disposal of assets of the nonprofit association in the event of its dissolution or becoming inactive.
5) The association can now appoint or designate a person as its agent upon whom all legal notices, demands and service of process can be served.
States that have adopted the UUNAA
So far, UNAA has been adopted by eleven states in the U.S.
|District of Columbia||Hawaii||Idaho||Texas|
Almost all other states have been reviewing the UNAA for its adoption.
Till that time, in all other states an unincorporated nonprofit association does not constitute a separate legal entity from its members and they will continue to be governed by a hodge podge of different statutes depending upon how courts decide to deal with specific cases.