Advantages to Incorporating a Condo Association

by Adam Cloe Ph.D./M.D.; Updated September 26, 2017

Often a condo association will want to become a corporation in order to protect its members from liability and to gain special benefits. While there are many types of corporations, a condo association can easily set up a limited liability corporation (LLC) for its members. While there are many advantages to incorporating, there are some obstacles that it presents.

What Is Incorporation?

Incorporation is the process of forming an entity called a corporation. A corporation is, under the law, essentially treated like a person. Corporations can either be nonprofit organizations, businesses, sports clubs or, on some occasions, the government of a city or town.

Advantages of Incorporating a Condo Association

The primary benefit of incorporating a condo association is that corporations are able to protect the personal assets of everyone involved. Once a condo association becomes incorporated, each member of the corporation is only liable for as much money as they have invested in it. As a result, if something goes wrong and there are legal complications, the personal assets of the people in the condo association are not at risk.

Other Advantages

A corporation may be subject to different taxation rules, so some expenses from an incorporated condo association may be tax-deductible. In addition, many businesses, especially retailers, prefer doing business with corporate accounts. Incorporating a condo association may result in discounts when buying supplies.

Requirements of Incorporation

Incorporation of any organization, including a condo association, means that certain regulations and rules must be upheld. For example, the official articles of incorporation must be filed with the state office. In addition, the corporation must have bylaws that are followed. A corporation must have an annual meeting, and the minutes of each meeting must be kept.

Disadvantages of a Corporation

In many cases, there is a certain amount of paperwork that must be filed for a condo association to be incorporated. There may also be a requirement for a date of dissolution (essentially a day when the corporation will end) or rules for dissolution (such as the death of a member). As a result, events that may seem inconsequential (such as a member leaving the association) may require special filings and meetings.

About the Author

Adam Cloe has been published in various scientific journals, including the "Journal of Biochemistry." He is currently a pathology resident at the University of Chicago. Cloe holds a Bachelor of Arts in biochemistry from Boston University, a M.D. from the University of Chicago and a Ph.D. in pathology from the University of Chicago.