Uniform Unincorporated Nonprofit Association Act

This article is provided for your information as a summary of the UNIFORM UNINCORPORATED NONPROFIT ASSOCIATION ACT (UUNAA) Which is mentioned in TYPES OF NONPROFITS. 

To read about this act in its entirety please visit it’s source at http://www.nccusl.org/

There are thousands of associations of people in the United States that fall into the category of unincorporated nonprofit associations. They range from local neighborhood associations to national associations with large membership. They are all associations that for one reason or another cannot or have not chosen to become not-for-profit corporations. The common law has been loath to give legal status to associations that do not incorporate. They are regarded as pure aggregations with no legal personality. They cannot own or hold real property. Such associations cannot sue or be sued as associations. Individual members may acquire liability simply because of membership in the association, no matter how casual. Acting as officers and directors may provide individuals with serious liability exposure. Finding insurance may be nearly impossible.These disabilities discourage voluntary participation in the activities of such associations. And yet such associations are essential to the well-being of every community, large or small, in the entire United States. There is at last a remedy that abolishes these unnecessary barriers to participation. As a foundation for community, there is no better solution than that proposed in the Uniform Unincorporated Nonprofit Association Act (UUNAA), promulgated by the Uniform Law Commissioners in 1992, with technical amendments made in 1996.

UUNAA defines unincorporated nonprofit associations broadly as unincorporated organizations “consisting of [two] or more members joined by mutual consent for a common, nonprofit purpose.” Members may be individuals, corporations, other associations, and governmental agencies. Having so defined these entities, the Act does five things for such associations and their members. First, it provides them with the legal capacity to receive, hold, and transfer personal and real property. Second, it provides limitations upon the liability of members and functionaries of these associations for tort and contract. Third, it provides them standing to sue and be sued as associations. Fourth, it provides a procedure for disposing of the property of an inactive association. Fifth, it permits designation of an agent for service of process. It does all of these things without requiring any association to conform to a registration statute, to pay fees to the state to qualify for the benefits of UUNAA, or to submit to any mandated form of organization and method of governance.

UUNAA permits a nonprofit association to acquire, hold, encumber, or transfer interests in real or personal property in its own name. An association can receive property from an estate. To facilitate holding and transferring real property, an association may, but is not required, to file a statement of authority in the real property records. Any person dealing with the individual named in the statement of authority and who gives value without notice that conferred authority is invalid, may regard the authority conferred as conclusive.  

UUNAA provides that any association subject to it is a separate legal entity, separate from its members. A person is not vicariously liable for the association’s torts or contracts merely by virtue of being a member, being considered a member, or participating in any way in the management of the association. Members may sue a nonprofit association and may be sued by it, as well.Concomitantly, the association has standing to institute, defend, intervene, or participate in any proceeding, judicial or otherwise, that involves it. It may assert a claim on behalf of members, if one or more members have standing to assert the claim in their own rights. A judgment against an association is not by itself a judgment against any member.

UUNAA provides for disposal of the personal property of an inactive association, first, to anyone entitled to that property in documents of the association. If there is no such document, then a cypres rule applies. The property must be transferred to another association pursuing broadly similar purposes. These transfers apply to associations that have been defunct for at least three years.

Lastly, UUNAA permits, but does not require, a nonprofit association to appoint an agent for service of process. This facilitates the legal rights of the association accorded it in other sections of UUNAA. These are the principal benefits of UUNAA to the many millions of people who aggregate into associations for everything from sport to neighborhood improvement. This Act will make voluntary action by citizens in their communities more secure and happier. It is exactly what is needed for communities, large and small, in the entire United States.

© 2001 National Conference of Commissioners on Uniform State Laws 211 E. Ontario Street, Suite 1300 Chicago, Illinois 60611 (312) 915-0195 ~ fax (312)915-0187

Basic Startup

Steps to Form an Unincorporated Nonprofit

1.     Develop vision and mission statements

2.    File articles of association if required by your state

3.    Obtain an employer identification number (EIN)

4.    Open a bank account and establish check signing procedures

5.    Establish an accounting system

6.    Develop an overall fundraising plan

Steps to Form an Incorporated Nonprofit

1.     Develop vision and mission statements

2.    Establish bylaws and board policies

3.    Select individuals to serve on the board of directors

4.    File the certificate of incorporation 

5.    File for federal tax exemption

6.    Follow state and local nonprofit regulations

7.    Procure necessary insurance coverage

8.    Establish an accounting system

9.    Develop an overall fundraising plan

Types of nonprofits

Types of nonprofits:

·         Unincorporated associations
·         charitable trusts
·         corporations

Advantages and disadvantages:

Unincorporated associations require less paperwork and are not as closely regulated or monitored by the IRS.  Laws have recently (1999) changed (see the UUNA Act) to protect unincorporated nonprofit founders from being personally sued as well as allowing them to hold assets such as property.  Before this law went into effect liability was one of the greatest disadvantages of not incorporating. It is difficult to receive tax-exemption without incorporation and nonprofits without exemption are not eligible for most grants. Charitable trusts can be recognized as tax-exempt, but they are at greater risk from personal liability Corporations require much more time, money, planning and organization.  Your organization will be completely under the control of an elected board of directors (or board of Trustees).  Founders are covered from personal liability.

Five Reasons to Incorporate – (source www.nolo.com)

1.     Your Association Makes a Profit From Its Activities
2.     You Want to Solicit Tax-Deductible Contributions (tax-deductible being the key word)
3.    You Want to Apply for Public or Private Grant Money
4.    You Want Protection From Personal Liability for the Group’s Activities
5.     Your Advocacy Efforts Might Provoke Legal Quarrels

Goals and Projects

The best way that I have found to start any new project is to start writing it down!  Go buy yourself two small spiral notebooks that you can carry with you everywhere.  The first notebook is a CREATIVE JOURNAL.  Start your creative journal with a question…  What PROBLEM do I want my mission to ANSWER? With that question, start a running list of notes, ideas, goals, projects and similar organizations.  ANYTHING relevant to your idea, the problem, or the solution.  This will help you develop a broad mission statement.  Any changes to your articles of incorporation or your mission will cost you money in the future, so it’s best to be as broad as possible to consider the twists and turns your organization might eventually take.Take another page and imagine that you have ALL THE MONEY IN THE WORLD.  Start listing projects that you think would help solve your problem, no matter how far-fetched.  DO NOT question, evaluate or criticize these ideas.  Keep this journal with you at all times!  You would be amazed how many ideas come to you while sitting in traffic!  This journal should be on-going.  Reread it often to refresh your mind during lulls of inspiration.The other notebook will be your GOALS & PROJECTS.  Pick at least three projects/goals that you believe will be the easiest to implement or the most beneficial.  Prioritize according to the values you MOST want to establish through your organization.  For each project ask yourself these questions:

1.  What makes this idea original?
2.  What needs am I answering?
3.  Who do I want to reach?
4.  When do I want to reach this goal?
5.  How do I plan to reach this goal?
6.  Define the biggest roadblocks and obstacles between you and your goal.

Then write AT LEAST one daily goal per day (Monday – Friday) to accomplish this project and overcome the roadblocks ( you can be as brave here as you want to –  I personally get more satisfaction from going above and beyond my daily goal rather than having a list of goals I never get completed).  I try to do all my goals for the week on Sunday and lay them out in order of importance.  Day-to-day issues come up, they are and always will be unavoidable.  Try not to lose site of what you are trying to accomplish but remember that YOU are the master, the DEADLINE is not.  All things in God’s time not ours ;o)

Disclaimer

This blog is meant to to assist emerging nonprofits with important information such as steps for incorporation and filing for tax exemption. 

© 2005 Tara Deck, Secret-Angels.Org

All information provided is for educational purposes only. Secret-Angels and/or Tara Deck do not imply or intend to represent legal council in any way. Thorough legal review is recommended before filing any paperwork with your local state and government.