The legal structure of your business is important. It influences things such as how you employ people and taxes so it is important to get it right. LLCs and corporations are incorporated businesses and are for-profit. This means that the profits a business makes will go to the shareholders and investors of the business, rather than back into the organization itself. Sole proprietorships and partnerships are unincorporated businesses for profit; but not associations. In most states, unincorporated associations do not have to register with their state, whereas unincorporated businesses do have to. Furthermore, an unincorporated association is not seen as an independent entity. Instead of this, an unincorporated association works like a partnership, but is not one, due to its non-profit status.
When profits cycle back into an organization directly, this is known as a non-profit organization. The non-profit will use any money it has made to increase the reach and influence of the business, to further the goal or mission of it. This is also why it is important that your association has a clear purpose; without a clear purpose it may be difficult to justify non-profit status. This status as a non-profit business is a somewhat touchy subject in the US at the moment, and for good reason; non-profits receive tax exempt status from the government, which is clearly hugely beneficial to the business. An unincorporated association is not recognized as a ‘legal entity’ under US law, which is different to an incorporated organization. The unincorporated organization doesn’t have legal rights, and is not a separate entity to the members which make it up. This is why members must hold the finances and property, for example, of an unincorporated association, because it in itself isn’t a legal entity, and cannot do these things.
An unincorporated association is a non-profit organization, and an association is just that: A not-for-profit, unincorporated association. But does your business fulfil the requirements to be one? And does it make sense to choose an association as your business’ legal structure?