Establishing a Not-for-Profit Entity

Overview

There are various types of not-for-profit legal entities, the most common being:

  • public company limited by guarantee

  • incorporated association

  • co-operative

Types of Not-for-Profit Legal Entity
Company limited by guarantee

A company limited by guarantee is a public company where the liability of company members is limited to the amount the members undertake to contribute to the property of the company if it ceases operation.

Some of the conditions imposed by the Corporations Act 2001 are that the company must:

  • have a minimum of three directors and one secretary

  • have a least one member

  • have a registered office address located in Australia which is open and accessible to the public

  • prepare, have audited and lodge financial statements and reports at the end of every financial year.

Visit www.asic.gov.au for more information.

Incorporated association

An incorporated association is a legal entity separate from its individual members. Associations are incorporated under state or territory legislation so they are restricted to operating within that jurisdiction.

The advantages of an incorporated association are that it has a separate legal identity that can continue regardless of changes to membership. It also provides financial protection by limiting personal liability to outstanding fees.

An incorporated association is a simple and affordable means of creating a separate legal entity for community based groups with limited resources. An incorporated association will generally need to:

  • have a management committee

  • hold an annual general meeting

  • keep minutes of all meetings and proper accounting records.

As legislation varies from state to state, it is important to visit your state or territory government website for more information.

Co-operatives

A co-operative is an organisation concerned with providing the collective needs of its members who benefit from the combined power and influence of the group (for example: purchasing, distribution or marketing power).

Each member has one vote so co-operatives are democratic and designed so that any surplus funds are normally reinvested or distributed to members.

Visit your state or territory government website for more information.


NOTE: The OCOS pilot sites indicated that an incorporated association was the preferred not-for-profit option because it limits the liability of individual members and is particularly suitable for community-based groups. However, it is appropriate to consult a lawyer or accountant before making your final choice.

Further Information

You will find more information regarding establishing a not-for-profit legal entity on the Australian Securities and Investments Commission (ASIC) website and various state and territory government websites.

The ASIC website provides information about registering a public company limited by guarantee. This type of company is registered under Commonwealth legislation (known as the Corporations Act 2001) and is recognised Australia-wide.

Each of the state and territory governments have websites with information and advice on the other types of not-for-profit entity, including incorporated associations and co-operatives.

NOTE: The material contained in this section is provided as general information only. You should consult your own legal and financial adviser before finalising a legal structure for your not-for-profit entity.