Incorporation provides your group with a legal entity that is separate to your members, directors or management committee.
This separate identity for the organisation has a wide range of benefits; however incorporation does also come with a number of responsibilities and other considerations.
The benefits of incorporation generally include:
- Consistent rules: things like meetings, electing new committee members and resolving disputes are usually covered by your organisation’s constitution and, in some cases, legislation.
- Access to funding: grants and funding from government or philanthropic trusts and foundations are usually only available to incorporated groups.
- Bank account: many banks offer free or low cost bank accounts for community groups; however these services are usually only available to registered Not For Profits.
- Taxation: you need to be an incorporated group to apply for endorsement from the Australian Tax Office. It’s also a good idea to have a separate legal entity if your group needs an Australian Business Number (ABN).
- Legal action: the committee of management and membership of an incorporated group are less at risk of being sued (as individuals) if something goes wrong. An incorporated group can also enter into contracts and take legal action.
- Licences and registrations: a separate legal entity for things like council permits, registering as a fundraiser and other licences your organisation may need depending on your activities and services.
- Purchases: clear ownership when purchasing goods or services such as merchandise, a domain name or subscriptions. If your group is not incorporated, any purchases may be legally ‘owned’ by the individual member who paid for them.
Once incorporated, responsibilities generally include:
- Annual reporting to your regulating authority (e.g. Consumer Affairs Victoria), including providing financial reports and paying an annual registration fee.
- Keeping accurate financial accounts; and other records of your organisation such as a register of members and minutes of board or committee meetings.
- Members of the board or management committee also have legal duties and responsibilities.