Being unincorporated means that the organisation has no separate legal identity of its own. The full risks and liabilities involved in running the organisation or business are taken on by the individuals who own and/or manage it. That means that those individuals enter into obligations, such as contracts, on behalf of their organisation and they are responsible for its debts and other liabilities. If you are on the management committee of an unincorporated association your personal assets are at risk if the assets of the business are not sufficient to cover all the debts and liabilities.
Since it is unincorporated, it does not have limited liability. The individuals involved will be personally liable for the debts of the association.
In the voluntary and community context, a trust is established when a donor gives an asset (usually money) to a group of individuals (trustees) and asks them to use it for a particular purpose. In general, for the trust to be legally enforceable, that purpose needs to be charitable. Charitable trusts are subject to slightly different rules from private family trusts.
The agreement between the donors and the trustees is set out in a "trust deed". This usually also sets out how the trustees are appointed and removed and how meetings are held amongst other things. A trust does not have members.
A trust is unincorporated and so it does not have limited liability. The trustees will be personally liable for the debts of the trust.
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.
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.
Incorporation provides an established formal structure for some types of stakeholder involvement.
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.
Many banks and financial institutions will insist on incorporation before providing loan finance.
There are different forms of incorporations that an organisation can adopt. The main forms are Community Interest Company, Company limited by shares, Company limited by guarantee and CIOs.
Companies can be either limited by shares (CLS) or limited by guarantee (CLG). Community interest companies (CICs) are a type of company and can be either CLS or CLG.
CLGs are traditionally associated with charities, trade associations and not-for-profit organisations. CLSs are divided into private companies (which make up the great majority) and public limited companies (plcs) which are subject to particularly stringent accounting standards and can offer their shares to the general public. Many (but not all) plcs are listed on the stock market so that their shares can be easily bought and sold. Although there are some plcs that are social enterprises they will very rarely be listed.
CICs operate in a broadly similar way to normal companies, except in certain aspects. The principal feature of a CIC is that it contains a lock on its assets. This prevents profits being distributed to members or shareholders other than in certain circumstances. A CIC is obliged to pursue the community interest and must report on how it does this to the CIC Regulator.
The CIO is intended to have all the advantages of incorporation, namely limited liability and the ability to hold assets in its own name, without the burdens of dual registration and requirements to comply with two sets of law, as the CIO is regulated solely by the Charity Commission.