[Moved to luv-talk] Quoting Daniel Jitnah (djitnah@greenwareit.com.au):
Hi Rick,
If one thing I can take personally, after having a quick read of the Loxton case you mentioned, and thanks for pointing out that case, this is a minefield of interpretation, (as too often). BUT if I were to choose between incorporation and not, I'd much more likely choose incorporation, as to me the clarity offered by the law in being incorporated outweighs the complexity and uncertainties of not being so.
Incorporation _can_ have real advantages, but in truth most of them relate to management of seriously non-trivial amounts of valuable property (like the Loxton Club in one of those cases, and quite a bit of prepaid Sunday school tuition in another). One of the points I make in the Linux User Group HOWTO is that LUGs do not ever own serious amounts of property, and I in fact advise them to specifically avoid even having a treasury, because squabbling over small stakes can be even more poisonous than squabbling over big ones. Incorporation doesn't remove complexity and uncertainties: It just changes _which_ complexity and uncertainties apply. And you always get a significant increase in mandatory paperwork, and ongoing fees to accompany mandatory filings with regulators, and (for groups with income) taxation of income both when it arrives at the corporation and subsequently again when it's paid out to owners. Since 2001, I have been a corporate director of my local system administrator's guild, BayLISA (http://www.baylisa.org/), organised as a tax-exempt non-profit corporation in California. On two different occasions, in 2002 and again in 2011, I've needed to rescue BayLISA from disaster because the group failed to do required regulatory filings. The first time, in 2002, it occurred to me to find our incorporation record at the California Secretary of State's office. Searching the office's business records Web site, I found that our corporate status was shown as 'Suspended'. Inquiring, I found that our Treasurer had found the (simple) paperwork too much trouble and, several years before, had talked a friendly Certified Public Accountant (CPA) to have his staff do the filings on BayLISA's behalf, but that nobody had bothered to check that the work was occurring, and they'd simply stopped and _nobody noticed_ until I checked. I did the research on how to 'revive' (restore the Active status of) a California corporation through significantly more detailed and expensive filings with the California Franchise Tax Board and the Secretary of State's offices -- but BayLISA"s President didn't want me to do that because they wanted to outsource the work to the CPA. A year later, nothing had happened, so the President let me do the work -- treating me as if he were doing me a favour(!). In 2011, again I found through checking the Secretary of State's Web site that our new Treasurer had gotten us in Suspended status through failure to do simple biannual filings -- and fixed it again. My tl;dr takeaway is that system administaators should not be trusted to do administrative tasks without verifying their doing so. So, now BayLISA has a procedure to periodically _check_ on needed filings, to compensate for sysadmins being mostly pretty flaky that way. Computerists generally are pretty flaky that way. But the larger point is that that entire hassle goes away if you eschew entirely the paperwork and fees that automatically come with incorporation and must be done without fail -- by not bothering with incorporation if you don't actually need it.