ato logo
Search Suggestion:

Legal structures for not-for-profits

To operate an NFP you need to choose the appropriate legal structure.

Last updated 31 October 2021

To operate your NFP, you will need to choose a legal structure.

To find out more about legal information and advice, go to Not-for-Profit LawExternal Link.

Unincorporated associations

An unincorporated association is not recognised as a separate legal entity to the members associated with it. It is a group of people who agree to act together as an organisation and form an association. The group can remain informal and its members make their own rules on how the group is managed. The rules may also be referred to as a constitution.

An unincorporated association is however an entity under tax law and treated as a company for income tax purposes.

Incorporated associations

An incorporated association is a legal entity separate from its individual members. Associations are incorporated under the state or territory legislation in which they operate. An incorporated association may operate outside the state and territory in which it is incorporated if the entity is registered with the Australian Securities & Investments Commission (ASIC) as a registrable Australian body under the Corporations Act 2001.

An incorporated association can continue regardless of changes to membership. It also provides financial protection by usually limiting personal liability to outstanding membership and subscription fees, or to a guarantee.

As legislation varies from state to state, you should visit the website of the relevant state or territory authority to learn more about the requirements in your state or territory for incorporated associations.

See also

Companies registered under the Corporations Act 2001

The Corporations Act 2001 is administered by the ASIC. NFP organisations registered with ASIC include:

  • public companies limited by guarantee – the most common type of company structure for NFP organisations registered with ASIC
  • proprietary companies limited by shares – such as a business that is wholly owned by a charity that has a similar charitable purpose
  • registered Australian bodies – such as an incorporated association registered under a State Act and registered with ASIC if it carries on business outside the state or territory in which it is registered
  • foreign companies – such as a charity formed or incorporated outside Australia but registered to carry on business in Australia.

Some reporting obligations under the Corporations Act 2001 do not apply to charities that are registered with the Australian Charities and Not-for-profits Commission (ACNC).

See also

Cooperatives

A cooperative is a type of entity which exists for the benefit of its members. It is only suitable as an NFP legal structure if it has rules to prevent surpluses or profits being distributed to members – referred to as non-distributing or non-trading cooperatives.

As legislation varies from state to state, you should visit the website of the relevant state or territory authority to learn more about the requirements in your state or territory. Cooperatives incorporated in states that have enacted the recent Cooperatives National Law can operate freely across borders, without requiring separate registration and reporting in those states.

See also  

Indigenous corporations

Aboriginal and Torres Strait Islander organisations can apply to be registered as a separate legal entity with Office of the Registrar of Indigenous CorporationsExternal Link (ORIC) under the Corporations (Aboriginal and Torres Strait Islander) Act 2006 (CATSI Act). They are only suitable as an NFP legal structure if they have rules to prevent surpluses or profits being distributed to members.

See also

Trusts

A trust is an obligation imposed on a person or other entity (the trustee) to hold property for the benefit of beneficiaries or for a particular purpose. In legal terms, a trust is a relationship not a legal entity. The trustee must deal with the trust property in line with the settlor's wishes as set out in the trust deed (or will in the case of a deceased estate).

Trusts are widely used for investment and business purposes as well as for the advancement of a charitable purpose.

They should only ever be considered with legal advice. As noted above, public and private ancillary funds must be established under an instrument of trust.

See also

Acts of Parliament

Some NFPs are set up under an Act of Parliament – for example, public universities are established under particular legislation.

QC33783