How to structure and set up your organisation

On this page

• Introduction
• Do unincorporated groups need a statement of objectives and rules?
• Do you need to register your group’s name?
• Can you register as a charity with the ACNC?
• For how long should you remain unincorporated?
• What are the dangers of remaining unincorporated?

Introduction

If your group has decided not to incorporate as a separate body, it may operate as an unincorporated association.

An unincorporated association is a group of people that have come together to further a common interest or purpose without forming any separate legally-recognised structure. They have not gone through an incorporation process so the unincorporated group doesn’t have its own legal identity and it will not have the word ‘Incorporated’, ‘Inc.’, ‘Limited’, or ‘Ltd’ after its name.

Whether an unincorporated group should incorporate (or not) is an important consideration that should be reviewed from time to time, especially if the size or nature of the group’s activities changes (for example, the group decides that it wants to employ a paid staff member or enter into binding contractual arrangements like obtaining insurance or a lease).

While it may seem easier (and less costly) for your organisation to remain unincorporated, there are important benefits that flow from incorporation.

Do unincorporated groups need a statement of objectives and rules?

Unincorporated associations do not technically need rules, but a written statement of objectives to describe their main purpose (for example, to promote public awareness of a particular endangered species) can be helpful.

Rules, objectives, and meeting procedures give the group a clear, identifiable direction and purpose, and govern the relationships between the members. It also helps to avoid misunderstandings among members in the future.

If you intend that the group will become a registered charity (which will entitle it to an income tax and other possible tax related benefits), the group will need to be able to establish that it has rules that include a charitable purpose. Pursuing the charitable purpose must be the main objective of the group and the group’s main activities must be consistent with the charitable purpose.

Ideally, rules could cover issues such as:

• the purposes of the group
• the membership of the group, including eligibility and method for accepting and removing members
• the appointment and replacement of key members to govern and make key decisions for the group
• the manner in which funds are to be managed and assets are to be held by the members
• the conduct of meetings including frequency, voting procedures and rights and quorum numbers
• delegation of authority or responsibilities among members
• dispute resolution procedures among members
• procedures for amending the rules in the future, and
• procedures for ending the group including the distribution of any remaining assets

Unincorporated groups should note that rules regarding their governance are unlikely to be legally enforceable unless there is evidence of a clear intention by the group to create a legal relationship between its members, or where it’s in the public interest to have those rules enforced.

New members should also be provided with a copy of the rules before they join and they should agree in writing to follow them. This provides evidence of the members’ intention and helps to avoid disputes at a later stage. Such a record of agreement may also be made in the group’s minutes (or other written record) of its meeting at which the rules were discussed or by getting a signed acknowledgement from the members of the group. It’s particularly important to do this where the group has income or assets.

Do you need to register your group’s name?

You are not required to register the name of an unincorporated association unless it 'carries on business' under that name. Registration of business names is managed by the Australian Securities and Investments Commission (ASIC).

Groups should be aware that registration of a business name will not grant ownership of that name, but it may provide some protection against the name subsequently being used by others. Registration of a business name also prevents that same name from being registered as a business name by another organisation at a later date. But registering a business name for an unincorporated association can cause issues if the group decides to register later. The name the group uses may not be available for the new incorporated entity.

Since an unincorporated group has no separate legal status, a member of the group will have to register the business name. That member will then hold the business name on behalf of the group. This will need to be carefully managed if the member holding the name stops being involved with the group.

Can you register as a charity with the ACNC?

Applying for registration as a charity is optional but is required for certain charity tax concessions from the Australian Tax Office.

The Australian Charities and Not-for-profits Commission (ACNC) can only register not-for-profit organisations as charities if they meet the ACNC’s rules for registration.

A charity can be structured in a number of ways including as an unincorporated association.

It’s important that you do research to make sure your unincorporated association will not only be able to satisfy the ACNC's registration requirements, but will also be able to comply with the ongoing legal and reporting obligations required.

If your unincorporated association becomes registered with the ACNC, there are ongoing obligations that it must comply with under the Australian Charities and Not-for-profits Commission Act 2012 (ACNC Act).

Although unincorporated associations are not legally required to have a set of governing rules in place, if your unincorporated association intends to register with the ACNC as a charity it may be worth considering introducing some form of a governance regime as this will greatly assist in demonstrating that your unincorporated association complies with ACNC requirements.

The ACNC requires a minimum standard of governance, set out in the governance standards on the ACNC website.

For how long should you remain unincorporated?

A common reason for remaining unincorporated is the freedom the group has to conduct affairs without having to report to government. This will generally suit small informal groups that are more social in nature (for example, a book group that meets regularly in members’ homes).

An unincorporated group can be arranged in any way it feels appropriate and is generally not restricted in how it conducts its meetings and activities (subject to general legal requirements such as food handling regulations). This may be ideal for:

• small groups with low-risk activities (like a book group)
• groups that are focussing on short-term issues which require urgent attention (but which again are low risk), or
• groups that don’t want to disclose any information (for example, their annual revenue) on a publicly-available register

While an unincorporated structure allows a flexible arrangement between members, there are a number of associated risks to bear in mind, which may lead to a decision to incorporate.

What are the dangers of remaining unincorporated?

If your group chooses to remain unincorporated, it won’t have its own legal status. This creates a number of potential issues that you need to be aware of including personal liability of members and other practical difficulties.

Without a separate legal ‘identity’ for the group (as distinct from the individual people involved in the group) an unincorporated association cannot be sued as a separate body if it incurs a liability or debt. Instead, individual members of the group could potentially each bear personal responsibility for the group’s liabilities or debts arising from its actions. It is therefore important that each member of a group which chooses not to incorporate is fully aware of the risk of personal liability created through their involvement, especially its key decision makers or members named on contracts.

Groups should also consider other practical difficulties that arise from remaining unincorporated, which include:

• an inability to enter into contracts or agreements under the group’s name. Instead agreements need to be entered into by all the members or by an individual member on behalf of the unincorporated group. An individual member signing for the group will therefore be responsible and liable for performance of the group's obligations under the agreement and possibly liable for any breach. Further, the unincorporated group will not have legal standing to enforce the obligations of any other party to the agreement and will be dependent on the individual member to enforce the relevant agreement
• an inability to own or lease property in the group’s name. Proprietary interests will need to be held by an individual member on behalf of the unincorporated group
• an inability to sue or be sued, or bring a legal action in the group’s name. The relevant members of an unincorporated association may be sued in a dispute involving the unincorporated association, because the unincorporated association itself can't be sued, and
• difficulties in receiving benefits or gifts bestowed on the group as a whole. It is not possible for an unincorporated association to receive goods in the group’s name. An individual member can receive a gift on behalf of the unincorporated association and this possibly creates an informal trust arrangement. When this occurs, that individual must act as trustee and use those goods for the benefit of the unincorporated association (that is, must use it to advance the purposes of the group).

When assessing the pros and cons of incorporation take the following factors into account, along with other issues relevant to your group’s particular circumstances:

• the group’s objects or its purpose
• risks associated with the group’s activities, and potential individual liability of members involved
• the number and type of agreements the group will need to enter into (for example, leases, bank accounts, insurance contracts)
• the importance of securing a binding commitment by members to the group’s objects or purpose
• the scale of the group’s activities
• the assets to be owned by the group
• the number of members and the criteria for admitting people to membership
• the intended timeframe of the association, and
• the additional legal and reporting obligations involved in incorporation

The content on this webpage was last updated in August 2024 and is not legal advice. See full disclaimer and copyright notice.