On this page:

• What is incorporation?
• Benefits of incorporation
• Disadvantages of incorporation

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What is incorporation?
Incorporation is a voluntary process whereby a not-for-profit club or community group can apply to become its own ‘legal person’ (i.e. the association becomes a distinct legal entity that continues regardless of changes to its membership).

In Victoria, clubs and associations usually incorporate under the Associations Incorporation Act 1981 by applying to Consumer Affairs Victoria. This method is a simple and inexpensive process available to not-for-profit associations with at least five (5) members.

Alternative options for non-profit organisations include incorporating as:

• a company limited by guarantee under the Corporations Law.
• an Indigenous Incorporated Association under the Aboriginal Councils and Associations Act 1976 (For Indigenous associations only. See the Office of the Registrar of Indigenous Corporations website for more information.)

For-profit businesses should incorporate under the Corporations Law.

Benefits of incorporation
Some of the advantages of incorporation include:

• Protection of the members and office holders against personal liability for debts and other legal obligations of the organisation.
• The ability to buy and sell property in the name of the organisation.
• The ability to accept gifts or bequests.
• Greater certainty and acceptability to potential contracting parties such as lenders, lessors, employees and suppliers of goods and services.
• The ability to sue and be sued in the name of the association.
• The ability to invest and borrow money.
• Greater eligibility to apply for grants.

Particular benefits of incorporating as an Incorporated Association under the Associations Incorporation Act 1981 (compared to a company limited by guarantee under the Corporations Law) include:

• Easier and less expensive to set up.
• Less onerous regulatory obligations and office-holder duties.

Disadvantages of incorporation
Some of the disadvantages of becoming incorporated include:

• The expense of becoming incorporated and meeting ongoing statutory obligations.
• The necessity to comply with legal formalities and the possibility of penalties for innocent breaches of the law.
• Restrictions on the ability to carry on business or trade.
• Less flexibility to cope with changed circumstances.

For more information, see Statutory Obligations of Incorporation.