NCVO and Social Enterprise UK
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Why incorporate/benefits of incorporation

There are a number of benefits if you incorporate:

  1. Legal personality

    An incorporated business is a legal entity in its own right. This means that it can enter into contracts, employ staff, lease property and have its own obligations and liabilities.
  2. Limitation of risk

    Incorporation limits the personal liability of the individuals involved. Incorporation is an important consideration if the organisation intends to employ any staff, take on significant property interests or undertake major contractual obligations.
  3. Clear ownership structure/governance

    Unincorporated organisations can operate relatively informally, being governed only by their constitutions. However, this means the powers and processes for decision making can be unclear. Incorporation involves the formalisation of governance structures within a legislative framework.
  4. Developing a sense of ownership

    Incorporation provides an established formal structure for some types of stakeholder involvement.
  5. Public accountability

    With limited liability comes regulation and disclosure requirements, which can increase public confidence in the company. Limited companies and charitable incorporated organisations have to have a registered address, file their constitutions, annual accounts and prescribed details of their directors etc.
  6. Recognition by financial institutions and investors

    Many banks and financial institutions will insist on incorporation before providing loan finance.
  7. Availability of Equity finance

    Equity finance is only available to certain types of incorporated organisations. If you want to raise equity investment, your organisation will have to incorporate.