This weekend the world's best golfers will battle it out at Augusta National Golf Club in the first major of the year for a chance to win the coveted green jacket. A quick search of the US company registers flags Augusta National Inc., a private company registered in the state of Georgia, as the owner of the Augusta National Golf Club.

Augusta is often regarded as a blueprint for how a golf club should be run, and whilst noting that there are particular US nuances at play, its structure as an incorporated entity may well offer certain UK golf clubs with an example of how they should be structuring their own business affairs.

Here in the UK there are a large number of golf clubs which remain unincorporated (up to 60% in Scotland, according to the latest statistics). These golf clubs are currently run as membership associations; this is the oldest and most informal way of maintaining a club. An unincorporated entity is not a legal entity itself, so members of an unincorporated association hold rights and liabilities between themselves and other members. Liability for the day-to-day business activities of the club generally rest with its managing members in their personal capacity. The main disadvantage of this set up is that members can be held personally liable which means they can be pursued directly for any of the club's debts or legal claims. Furthermore, contracting arrangements and owning assets as an unincorporated association can be complicated because it cannot enter a contract or own assets in its own name.

The simplest way to limit personal liability and overcome the challenges of contracting and owning assets is to incorporate the club. Brodies' Sports law specialists have become increasingly involved in advising UK golf clubs as to how they can go about this and the associated benefits of doing so.

Incorporation is the process by which a new or existing business registers as a limited company under the Companies Acts. A limited company is considered to be a separate legal entity from those who own or run it. The separate legal identity of a newly incorporated club allows it to operate in its own name and importantly it provides liability protection for those involved in its operation.

Following incorporation, it is the club itself which is liable for its debts and any legal claims raised against it. This insulates its members from personal exposure.

The commercial benefits of incorporating a golf club can be extensive. For example, the club's ability to own things such as real estate, equipment and intellectual property can make management of these assets much easier.

Taking the ownership of intellectual property as an example, clubs both big and small benefit from the ability to register trademarks in their own names and to otherwise protect their unregistered intellectual property rights. With the influence of YouTube golf and the rise of jet-setting tourists looking for "hidden-gems", clubs are increasingly looking to commercialise their intellectual property, for example via the promotion of their name and logo on golfing products. This can be more difficult for unincorporated clubs as the ownership of the associated intellectual property is often fragmented and in some cases is contested.

It is also easier for an incorporated club to borrow money as it has the ability to grant securities over its assets, something that an unincorporated association cannot do. On the flipside, a club is also much more attractive to potential investors if it has the appropriate legal structures in place. This allows the investor to undertake the required due diligence to assess the investment opportunity.

Finally, when entering into day-to-day contracts unincorporated associations require them to be executed on their behalf, usually by the managing members. This can become an internal barrier to doing business as most members do not want to take on the personal exposure that comes with contracting in their own name. The unfettered ability to enter into standard contracts with employees, professionals, equipment suppliers and facilities management companies, as an incorporated club should not be underestimated.

Ultimately, the benefits of incorporation can lead to a more efficient operating model for many golf clubs across the UK.

Please bear in mind that there are increased governance costs associated with incorporation and it will not always be the most appropriate corporate structure for every club. There are also real estate and tax considerations which have not been explored within this article. Clubs should seek independent advice from national governing bodies and professional advisors operating within the industry before taking action.

For more information on the practicalities of incorporating your golf club, please see Brodies' guide to incorporation here.

Contributors

Andy Nolan

Partner

Calum Lavery

Senior Solicitor

Catriona Salton

Solicitor

Ally Burr

Associate

Clare O'Toole

Solicitor