Why Incorporate?

What protection does incorporation provide?

Courtesy of WereBear, co-LC of Charlotte

Incorporation is not insurance, it's a firewall that restricts liability suits to the assets (money & goods) of the corporation ALONE, and prevents the plaintiffs from going after the PERSONAL assets of the individual organizers of a PPD.

Here's an example

A group of witches'n'pagans'n'heathens (Oh, my!) in Smallville band together to stage Podunk PPD and rent City Park for the event. The ritual leaders decide that as part of the Main Ritual, they'll brew a group potion (kinda like Stone Soup) in a huge cauldron, and all the participants get to throw in an ingredient. Some damn fool at the Smallville Nuclear Plant decides that reactor cooling water would be a way kewl thing to add because, like, you know, it glows this awesome, you know, spiritual blue!

Due to the magical / alchemical interaction of the reactor water with all that eye of newt and toe of frog, the cauldron melts down and dumps toxic, radioactive glop all over the middle of City Park. Next thing you know, the EPA comes in, declares the park a Superfund Site, spends a billion dollars to clean it up, and hits the town of Smallville with the bill. Then the Smallville Town Council sues the bejeebus out of every single leader & organizer of Podunk PPD, wins, and the court goes after the homes, cars, land, savings accounts, Pagan jewelry collections and First Born children of the organizers, leaving every single one of them destitute, doomed to peddling cheap spell kits on the street corner.

It Could Happen To You !

BUT...

If Podunk PPD had been incorporated before the Great Cauldron Disaster of Oh Eight, the Smallville Town Council would have been restricted to suing ONLY Podunk PPD Incorporated (NOT the INDIVIDUAL people who were the organizers, incorporators, board, etc).

In a nutshell, incorporation protects the PPD organizers from PERSONAL liability, restricting liability to the CORPORATION. And as most of us know, our PPD organizations don't have diddly squat for money in the bank!

Now, there are instances of negligence, malfeasance, etc. where the law can reach through the corporate shield and STILL go after the personal assets of the leaders, but those are few & far between, and that's why we all run events EXACTLY according to the rules National and our local venue lays down, right? It's also why you really ought to carry a General Liability policy for the event (indeed, your venue may require it) because lawyers will go after low-hanging fruit, and it's a LOT cheaper to collect a LOT more money against a $2,000,000 general liability policy (because that's what it's FOR) rather than to try to squeeze pennies out of pagans.

The IRS and the tax-exempt status are entirely separate from the liability protection that incorporating grants, because it's PPD National that holds the the 501(c)(3) designation, which gets extended to individual, local PPDs via incorporating as a CHAPTER of National, then filling out the paperwork that Brian will then send on to the IRS. Basically what's going on there is the Feds want each local PPD to be clearly identifiable (via their individual EIN) within the umbrella of National's tax-exemption; it's a fraud prevention thing.