Deciding whether to incorporate

Activities

A separate legal entity that can do things in its own name:

• open a bank account
• arrange insurance
• sign documents
• enter into contracts (for example, to employ staff)
• buy or lease property/assets
• borrow money
• take legal action in the courts.¹“How to decide whether your group should incorporate,” Justice Connect, updated February 2022, [link]; Note: unincorporated groups can open bank accounts or secure insurance, however without the limited liability that an incorporated entity has – the individual members of an unincorporated group may be personally liable for obligations under the bank account or policy

Not recognised as a legal entity, cannot do things in its own name:

• cannot enter into contracts (including employing people)
• not recognised by government, the courts or businesses.
• can be difficult to get insurance – members need to take out insurance in their own names.

Regulatory requirements

Must follow incorporation laws and government regulations.

Must report to the relevant incorporation regulator (ORIC or ASIC).

Do not have to follow many of the requirements or complete the forms imposed on corporations.

Less government regulation and red tape.

Costs

Involves large start-up costs and ongoing workload:

• cost and work involved in compliance with statutory – the legal rules – and reporting requirements
• applying for and acquitting grants
• setting up administrative systems.²There is an exception where a director breaches certain duties.

Do not have to pay the costs associated with incorporation.

Liability

Limited liability for individuals – protects members from being personally liable for the corporation’s debts.³“How to decide whether your group should incorporate,” Justice Connect, updated February 2022, [link]

Does not have the benefits of limited liability – if something goes wrong, individual members can be held responsible.

Succession

Perpetual succession – the separate entity continues even when your members change or leave.

The entity exists until it’s deregistered or ‘wound up’.⁴“How to decide whether your group should incorporate,” Justice Connect, updated February 2022, [link]

No perpetual succession- if membership changes, group may not be recognised by others.

Funding

Increased funding options – easier to get government funding, grants and donations.

Some government grant programs only give money to incorporated entities.

Some tax concessions more easily available for incorporated groups.⁵“How to decide whether your group should incorporate,” Justice Connect, updated February 2022, [link]

Easier to get charity status.

Difficult to get grants, tax concessions, donations, government funding and charity status.

Cultural ways of governing

Less freedom to integrate cultural ways of governing into organisational arrangements.

Greater freedom to integrate cultural ways of governing into organisational arrangements.

Flexibility and control

More formal and less flexibility.

Less control over agenda and less flexibility in decision-making procedures.

More informal and greater flexibility.

Greater control over agenda and flexibility in decision-making procedures.