Incorporation
What is incorporation?
Who should incorporate?
Benefits of being incorporated
Disadvantages of not incorporating
How do I incorporate or maintain incorporation?
What is incorporation?
Incorporation creates a legal entity that is separate to the individual members. Members of unincorporated bodies face the possibility of being sued as individuals. Incorporation provides a certain amount of limited liability for members, as long as they follow accepted business and community standards. Incorporation is voluntary.
The Associations Incorporation Act within each State/Territory provides small non-profit community-based groups with an easier and relatively inexpensive means of establishing a legal entity, rather than forming a co-operative or a company.
Incorporation also allows the Association (Club) to:
- Continue regardless of changes to membership
- Enter into and enforce contracts, including the power to hold, acquire and deal with property
- Sue or be sued
Who should incorporate?
Incorporation is advisable if the Association (Club):
- Owns land
- Enters into contracts, including employment contracts
- Conducts public events and matches where other people are invited to participate
- Seeks to hold a liquor license or permit
- Has a reasonable turnover of money
- Is likely to borrow money
- Conducts any sort of business, whether charitable or non-charitable
- Charges fees to outsiders to see or participate in its activities
Benefits of being incorporated
With the Association (Club) having a legal existence, it:
- Exists as a separate legal entity, regardless of changes of membership
- May enter into contracts
- May own land and other property
- Can sue and be sued in its own right
- Can accept gifts and bequests
- May borrow money
- Members or officers of the Club are generally not liable to contribute towards the payment of debts or liabilities of the Club
- The name of the Club concludes with the word 'Incorporated' or the abbreviation 'Inc.' as part of its name
- Groups seeking government grants will frequently find that it is a condition of their grant that they be incorporated
Disadvantages of not incorporating
The legal disadvantages of an unincorporated association arise because an unincorporated association has no legal existence separate from that of its members.
The most serious problem is the potential liability of the committee and the members of the unincorporated association. Personal liability attaches to the committee members of an unincorporated club and, in certain circumstances may also extend to the members. The committee members may therefore be sued for the debts of the club and the negligence of any of its members.
In many instances, incorporation or a formal legal structure may be a pre-requisite to obtain grant funding from a State or the Federal Government.
How do I incorporate or maintain incorporation?
The Associations Incorporation Act(s) are not identical in each State/Territory. Clubs should refer to the relevant legislation in the State/Territory in which they are incorporated or intend to incorporate.
Click here for more information on incorporation in your State/Territory.
Acknowledgements
Reproduced with permission from the Australian Sports Commission, Departments of Sport and Recreation WA and NSW and the NSW Office of Fair Trading.
