non-profit-fact-sheets
What is an Incorporated Association?
Published: February 17, 2023
Read Time: 9 minutes
An incorporated association is one of several formal legal structures available to non-profit organisations in Australia. Incorporating your association can offer your members certain rights and legal benefits. The main benefit of incorporating as an association is that your members will have limited liability status and will be protected legally if you fail to meet your financial obligations or are sued for negligence.
When establishing a non-profit organisation, founders can choose from a large range of legal formats. Find out more about the other types of legal structures here. Your organisation’s legal structure will determine the types of activities it is legally able to carry out and which government bodies it is required to seek registration from or report to. Incorporated associations are one possible structure of a non-profit organisation.
What is an incorporated association?
According to the Business Victoria webpage, an incorporated association is a registered legal entity “usually established for recreational, cultural or charitable purposes” with the intent of putting all profits back into the organisation’s activities 1.
Incorporated associations are considered ‘legal persons’ under the law. An incorporated association has an identity distinct from its founders and members and will continue to exist even if they leave the organisation. It can also be sued, legally lease a property, enter into contracts or hold assets in its name. Incorporation provides some protection for an organisation’s members and/or directors but it also carries additional legal and administrative obligations, such as accounting, auditing and annual reporting requirements.
What are the benefits of an incorporated association?
Choosing an incorporated association as your organisational structure can provide several. First, it allows you to continue your work even when there are changes to your membership. Second, your organisation can accept grants, bequests, and gifts as donations to fund its activities. Third, you can invest or borrow money in the name of your organisation to finance your activities. As an incorporated association, you can enter into legal contracts and will generally have more protection when it comes to litigation, including the ability to sue.
Conditions for becoming an incorporated association
There are a number of conditions that an organisation wishing to incorporate must meet. These will differ depending on the state or territory in which the organisation seeks to become incorporated. For example, in Victoria the minimum number of members for an incorporated association is five. Below is a list of some of the common prerequisites to incorporation in the state of Queensland, according to the body responsible for incorporated associations, Fair Trading Queensland:
- “Be a non-profit association
- Have at least seven members
- Convene a general meeting and pass a motion to incorporate by resolution
- Choose an appropriate name for the organisation
- Adopt a set of operating rules (a constitution)
- Elect a President, Secretary and Treasurer (two different people must hold the President and Treasurer positions)
- Lodge an Association Incorporation Form with
- Pay a registration fee
- Have an address in Queensland where the documents can be personally served.”
To find your state’s requirements, see the ‘Resources’ section at the end of this article.
How to register as an incorporated association
To register for incorporation, an association must be considered a not-for-profit entity, that is its members must not be receiving financial gain from their activities. To receive incorporation status, you will need to submit a form through the appropriate government agency. In the state of Victoria, for instance, registration is made with Consumer Affairs (CAV). Ensure the proposed entity’s name is not similar to any other entities in CAV’s Victorian names register, or to any listed in the Australian Securities & Investments Commission (ASIC) organisation and business names register. You should also check with the Australian Business Register to see if your association needs to obtain an Australian Business Number (ABN).
Your association must also hold a meeting with members to vote on whether incorporation is the right decision for its future. If you obtain a majority of votes, your will then need to approve changes to your rules and constitution in compliance with your state laws. In Victoria, incorporated associations are governed through the Associations Incorporation Reform Act 2012. There may be model rules available in your state to help you with this process. Your administrative Committee will need to authorise a person who lives in Australia to take measures to incorporate the association. This person will become the first Secretary of your newly incorporated association. Alternatively, you can appoint an official delegate such as an accountant or lawyer. The delegate assists the Secretary to ensure the organisation’s legal obligations are met.
Incorporated associations are subject to state or territory incorporation laws and are administered to by a government body within the relevant state and territory. This also means that the operations of an incorporated association tend to be restricted to its home state. Consequently, this legal structure can restrict the growth of your organisation and limit the location where you conduct your activities.
What are the requirements for remaining registered as an incorporated association?
To maintain your charity status, you must keep proper financial records and document your operations. Australian charities are required to report annually to the Australian Charities and Not-for-profit (ACNC) Commission by completing an Annual Information Statement. Reporting allows the government to protect public trust in the non-profit sector and ensures transparency and accountability. You must also notify the ACNC of any changes to your address, legal name, Board Directors or trustees, and constitution.
Incorporated associations: Rules to follow after receiving status
In Australia, when recruiting members for an incorporated association, applications for membership with the organisation should be approved by the administrative Committee and recorded in the minutes of an official meeting. In most cases, the new member will need to pay a fee to join, and the process will renew annually. Committees often consist of a President, Vice-President, Secretary, Treasurer, and several additional members, all of them elected.
Members are entitled to vote on resolutions and are able to submit items of business during a general meeting. In addition, incorporated associations must create and maintain a register of their members and make the document accessible to them. Organisation members should also have access to the meeting minutes. Your association must hold an annual general meeting at the end of each fiscal year. The main purpose of this meeting is to receive the annual report, review financial statements, and approve the minutes from the previous year. This is also a good opportunity to elect members of the Committee.
As an incorporated association, you will need an approved constitution with rules that describe how you plan to deal with membership qualification, what constitutes a quorum at your meetings, and which provisions you will make during elections. The Committee must also submit a copy of the annual financial statement to all of the members. To resign, a member will need to provide written notice to the association. Members are subject to disciplinary action when they fail to comply with the rules of the constitution. Incorporated associations cannot distribute profits to members for personal gain and must use any funds they receive to achieve the objectives of the organisation.
Resources
As an incorporated association, you may need to apply for other local, state, or federal licenses, permits, or registrations. Check the Australian Business Licence and Information Service (ABLIS).
For more information on the conditions of incorporation and the government bodies that administer to Incorporated Associations in each state/territory, visit the relevant website below:
- Victoria — Consumer Affairs Victoria
- News South Wales — NSW Fair Trading
- South Australia — Consumer and Business Services
- Western Australia — Department of Commerce
- Queensland — Office of Fair Trading
- Tasmania — Office of Consumer Affairs and Fair Trading
- Australian Capital Territory - Access Canberra
- Northern Territory - Department of Business
Who owns an incorporated association?
Once your organisation received its incorporated association status, it becomes a legal entity separate from its members. This means it is legally recognised as a ‘legal person’ under the law and is able to enter into contracts, open a bank account, own or lease property in its name, and continue to exist even after its founding members are long gone. It is therefore the corporation itself that ‘owns’ its accounts or assets. A non-profit corporation does not have owners.
Can incorporated association own property?
Yes, members of an incorporated association have limited liability and the organisation can purchase property. If someone is sued, they will be protected against personal responsibility for any debts acquired by the association. Any profits the organisation makes will not be subject to income tax. The organisation itself can also lease or purchase property in its name.
What are incorporated association Committee members' duties?
Once elected, Committee members must review the organisation’s rules and the Associations Incorporation Act. They will be responsible for ensuring compliance. Committee members must exercise diligence and reasonable care and use their position in the best interest of the organisation. The President acts as the Chairperson during committee meetings, and the Vice-President takes over the role during his or her absence. The Committee Secretary is responsible for filing official documents and maintaining a register of members (with the exception of financial records). The committee Treasurer receives and pays out money in the name of the organisation. The Treasurer must also ensure financial records are kept and the organisation produces and shares an annual financial statement.
What if my organisation is unable to pay its debts and becomes insolvent?
Although each state has its own rules, generally, if your incorporated association becomes financially insolvent and is unable to repay any debts, one option is to file for bankruptcy. The Associations Incorporation Act does not provide a definition of what it means to be unable to pay debts. However, your creditors may decide to apply to the Supreme Court and ask that your association be closed down and your status revoked. Another option is to appoint an administrator to manage your financial affairs. It is illegal for Board members to allow an organisation to collect debts if they know it is not able to pay them.
What are the steps to closing down an incorporated association?
Some incorporated associations may choose to cease operations, either because they no longer wish to operate or because the organisation has become financially insolvent. If you haven’t filed for bankruptcy, you can make an official request to close down your incorporated association. The first step is to call a general meeting and pass two special resolutions: 1) to close the organisation down, and 2) to decide how your surplus assets will be distributed. To distribute surplus assets as an incorporated association, you will need to obey any existing association rules, obtain receipts from any organisation that will receive your assets, and pay off all of your liabilities. Once this step has been taken, you can apply for voluntary cancellation or ask that your incorporated association status be cancelled. To do this, you will need to complete and submit a closure form.
This fact sheet is intended as a simple overview. Non-profit law is incredibly complex and there are many components, allowances, restrictions, exceptions and important qualifications that are not described above. Dedicated legal advice should be sought from a legal practitioner before taking action.
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Better Boards connects the leaders of Australasian non-profit organisations to the knowledge and networks necessary to grow and develop their leadership skills and build a strong governance framework for their organisation.
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