Why Did SORSA Organize as a Nonprofit Corporation?

By: Drew Linnenbom, Esq. Peck Shaffer & Williams, LLP

SORSA’s organization as an Ohio nonprofit corporation provides its school district members with certainty and continuity. This certainty and continuity is a function both of the provisions of the Ohio Revised Code that regulate nonprofit corporations and the rules and procedures implemented by SORSA in accordance with those laws.

After careful examination, the decision was made to organize SORSA as a nonprofit corporation. This choice was a result of several factors, including the potentially large size of SORSA, both in membership and assets under control, the long-term nature of SORSA’s purpose, and the increased protection from legal liability that incorporation offers to members.

SORSA decided against forming as an unincorporated association because it did not think it would be a good fit for a joint insurance program for schools. Ohio law on unincorporated associations is not nearly as comprehensive or developed as it is in regards to nonprofit corporations. Beyond a handful of limited rules, unincorporated associations have few legal requirements to comply with, meaning fewer protections for member schools.

Nonprofit corporations, in comparison, must comply with a significant number of regulations under Ohio law, which helps to protect SORSA members by providing structure. Under Chapter 1702 of the Ohio Revised Code, when conducting SORSA business, SORSA must comply with restrictions and requirements relating to annual meetings, elections, voting rights of directors and members, duties of directors and members, and notice requirements for certain actions. In an organization like SORSA where members may have significantly different backgrounds and viewpoints, this regulated structure and the rules SORSA has developed under that structure are particularly important. They help to allow members, officers and directors to know their role in furthering SORSA’s purpose and goals.

Incorporating also provides significant advantages to SORSA’s members regarding liability. Ohio law treats a corporation as a legal person, separate from that of its members or directors. As a result, SORSA members enjoy what is known as “limited liability.” Limited liability protects the assets of the members in a suit against the corporation, because corporate assets are separate from personal assets of members. Also, members and directors of a corporation are protected from suit against them individually for acts of the corporation, with a few very specific exceptions. Although members of unincorporated associations have similar limited liability in suits specifically against the association, under Ohio law, a plaintiff can choose to bring suit against the unincorporated association or its individual members.

Additionally, corporations have the advantage of being able to last forever, as long as proper documents are periodically filed with the Secretary of State. This will allow SORSA to continue working for its member districts long after the initial directors and incorporators have moved on.