In Victoria, a club or community group that operates as a not-for-profit can be registered as an incorporated association. You can recognise an incorporated association by the word ‘Incorporated’ or the abbreviation ‘Inc.’ after its name.
Becoming an incorporated association means that the members have decided to give their organisation a formal legal structure. This also means that the club or community group becomes a ‘legal person’, which is a legal entity that stays the same even if its members change. The legal entity can enter into contracts in its own name; for example, to borrow money or buy equipment. Incorporation protects the individual members of the association from legal liabilities.
Under the Associations Incorporation Reform Act 2012 (the Act), Victorian incorporated associations must register with Consumer Affairs Victoria.
Should your club incorporate?
Incorporating your club or community group is not compulsory. If you do incorporate, there are rules your club or community group must follow.
Becoming an incorporated association is not suitable for organisations that aim to make a profit for their members. The table will help you decide whether incorporating is the right option for you.
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Things to consider
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If you incorporate
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If you do not incorporate
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Membership
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Your organisation must have at least five members.
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Your organisation can have any number of members.
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Not-for-profit status
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Your organisation may trade, but not in order to distribute profit to its members.
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Your organisation is not restricted from trading or doing business for personal profit.
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Legal status
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Your organisation becomes a ‘legal person’ (a legal entity that stays the same even if its members change). It can do the following things in its own name:
- accept gifts or bequests
- buy and sell property
- invest and borrow money
- open a bank account
- sue and be sued
- take out public liability insurance with greater ease.
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Your organisation cannot do any of the things described in the ‘if you incorporate’ column. Individual members would do these things on behalf of the unincorporated association.
A member of an unincorporated association is usually personally liable for contracts they enter into and decisions they make.
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Legal protection for members
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Members and office bearers are protected against personal liability for the organisation’s debts.
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Members could be personally liable if the organisation incurs debts or has legal problems.
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Statutory obligations
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Your organisation must comply with requirements in the Act. This includes accounting, auditing and annual reporting requirements.
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Your organisation is not bound by the Act. Your organisation is still bound by other state and federal laws, such as tax laws.
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| Costs |
Your organisation must pay fees for incorporating and lodging some administrative forms. There may also be costs involved in meeting other obligations, such as financial reporting.
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Your organisation will not have the expense of meeting statutory obligations of incorporation.
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Disputes
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Your organisation must have a procedure for resolving internal disputes or use the procedure in the model rules for incorporated associations.
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Your organisation is not required to have or use a dispute resolution procedure.
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Contracts and agreements
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Your organisation can enter into contracts and agreements in its own name. This offers more certainty to other parties, such as lenders, lessors, employees and suppliers of goods and services.
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Your organisation cannot enter into contracts or agreements in its own name.
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Grants
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Your organisation may be eligible to apply for more government and non-government grants.
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Your organisation can't apply for grants that require applicants to be incorporated.
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Alternative organisation structures
Your club or community group can also consider other options such as: