Societies/Associations

3. SOCIETIES/ASSOCIATIONS:

Societies are governed by Societies Act of 1966. The Act governs aspects of the Society’s formation.
Societies are not often used as a business entity. They can either be extremely simple or quite complex, depending on whether or not they are registered. However a registered society has more advantages as compared to one which is not registered.


Establishment procedure: Normally, incorporation of a society is more or less similar to that of a company but simpler and a little cheaper.
Finance: Initially, finance will depend largely on the personal credit of the members; after registration it can borrow in its own name.
Continuity of existence: an unincorporated society will only continue as long as members are interested. An incorporated society has perpetual succession and so an existence independent of its members.
Limitation of liability: The liability of members of an unincorporated society is limited to the amount of their subscription to the society, however in some circumstances the committee members can be held liable. In an incorporated society all members’ liability is limited.
Control of the society: a society is normally controlled by a committee acting in accordance with the rules of the society.
Formalities: Normally formalities surround the issue of reporting the society’s finances.
Admitting new investors or participants: this will depend on the rules of the association, as devised by the members.
Tax implications: The members of an unincorporated society will be taxed as any other individual. An incorporated society may be liable to tax in some circumstances, but this is unlikely to affect its members as any profits made by the society cannot be distributed.
Cessation: The ease or difficulty involved in winding up a society will depend entirely on the nature of the society in question.