Pros & Cons of Incorporating

The main reason for incorporating is to limit personal liability.

As our current community sits, once we own the common lands, every community member is personally liable for the expenses of the common lands and for any damages incurred from the use of the common lands. That doesn't seem fair does it?

If we create a corporation that takes ownership of the lands, then the corporation would be the responsible party, and community members would be insulated. The lands themselves as well as other assets of the corporation, such as its bank account, could be liable, but none of us would have our homes in jeopardy. That is a mighty good reason to incorporate.

In order to maintain the benefits of incorporation, the corporation must remain in 'good standing,' which means it must file annual reports to the state and stay current in filing it's tax returns. Most HOAs are established as state Non-Profit Corporations and they largely have tax exempt income as far as the IRS is concerned, provided they file on time. The paperwork is just not that onerous and we are already filing tax returns regardless. There is a filing fee to establish a non-profit corporation: its $25, unless we want the paperwork done within three days, and then its $100.

Filing requires that a registered agent is chosen as the address of record for legal issues. It requires that certain documents be created: initially the Articles of Incorporation. Within 30 days, Bylaws must be filed. So there is some work to be done. All those documents can be amended whenever the community decides, so nothing is ever cast in stone.

So the next question is do you, as a community member want to incorporate?

Next: how do we make this happen?