Incorporating your PA/PTA provides useful liability protection for the people running it because if you incorporate, your PA/PTA’s directors, officers, and volunteers will not be personally liable for the debts or actions of the PA/PTA. If your PA/PTA is not incorporated, it will be treated as an unincorporated association. An unincorporated association does not provide any personal liability protection against debts or actions for the people who control it. However, under New York law, a corporation is treated as a separate legal entity that is solely responsible for its actions and debts. This liability protection is sometimes known as the “corporate shield.”

New York law also provides “qualified immunity” for directors and officers of not-for-profit corporations. This means that directors and officers of your PA/PTA will not be found liable for actions they take in their capacities as “fiduciaries,” or trusted representatives, of the corporation, except in certain circumstances (including when they act with the intent to cause harm, or take certain prohibited corporate actions).

Additionally, New York law authorizes not-for-profit corporations to “indemnify” their directors and officers in certain circumstances. This means that your PA/PTA, as a not-for-profit corporation, can pay judgments, settlement amounts, and reasonable fees (such as legal fees) that result from suits against its directors or officers, as long as the director or officer being sued acted in good faith and believed he or she was acting in the best interests of the PA/PTA. (In other words, your PA/PTA cannot pay for legal fees for a suit against a director if the director did something illegal on purpose.)

Similar to New York’s qualified immunity protection for directors and officers, the federal Volunteer Protection Act of 1997 provides qualified immunity for your PA/PTA’s volunteers. As long as the volunteers are acting within the scope of their responsibilities and do not act with gross negligence or recklessness, they cannot be sued for harm resulting from their actions.

However, despite these protections, there are still some circumstances in which it may not be possible to shield your PA/PTA’s directors, officers, and volunteers from liability. Additionally, if directors, officers, and volunteers of your PA/PTA are sued in connection with work they do for your PA/PTA, these lawsuits can still result in significant legal fees, even if they are ultimately unsuccessful.

Because of this, your PA/PTA may still want to consider purchasing some insurance to alleviate any costs of potential lawsuits, whether against a director, officer, volunteer, or the PA/PTA itself. Note that some individuals will not undertake the roles of directors and/or officers unless there is insurance in place to fully cover the costs of indemnification. See the Insurance page for more information.