So you have started a sports club or maybe a social group looking to connect with others. You know what kind of group you want to make but you don’t know how to make it. Or maybe you already have the group but you don’t know what the next step is. Great, this article will run you through all the key points to making an association.
There are two kinds of associations, incorporated and unincorporated. Your group might fall under one of these categories already. Don’t stress just yet about knowing what they are, this article will run you through the differences as well. Although one has more legal obligations than the other, they both exist under tax law. It is important to know whether you do fall under one of these groups to make sure you are complying with the law. Lastly, each state may have different requirements to start an association. Luckily, the Australian Tax Office (ATO) has links for what you need for each state.
Table of Contents
What is an Association?
An association is generally a not-for-profit (NFP) group, with people together for a common purpose. This purpose does not have to be anything grand. It can be something simple like a sports club or a social group. There are two kinds of associations; unincorporated and incorporated.
Unincorporated Associations
An unincorporated association is fairly flexible. You can have a set of rules for the group without needing a formal constitution. There are also no minimum members required. Furthermore, you do not need to register either. However, the group is not a separate legal entity. Meaning, if the association has any problems, the members themselves are liable. Although the association is not incorporated, it is still treated as a company for income tax purposes.
Incorporated Associations
An incorporated association is a bit different. When an association becomes incorporated, it becomes its own legal entity. As a result, it can enter into contracts, open up bank accounts and continue after its members change. In addition, the members gain the benefit of having limited liability. General members of an association are usually only liable for their membership fees. In contrast, obligations are also created when an association becomes incorporated. The association now needs to comply with reporting and financial requirements, amongst other obligations. However, if you plan to operate as a business or give your members monetary benefits, you cannot incorporate your association.
There is no obligation to incorporate your association. To determine whether incorporating is the right move for you, it is a good idea to talk it over with a business lawyer first.
What do you need to start one?
There are no legal requirements to start an unincorporated association.
To start an incorporated association in NSW, there are a number of things you need:
- Five or more members
- A Constitution (Needs to address each matter in Associations Incorporation Act 2009 sch 1 (‘The Act‘))
- A Committee (At least three or more members, each member of the committee needs to be over 18)
- Public Officer (Official point of contact for the association, also needs to be over 18)
- An Official Address (A place the public officer can generally be found)
In addition, it is worthwhile considering your association’s insurance needs. However, there is no obligation under The Act to have insurance for your association.
Do you need an ABN?
You do not strictly need an ABN to start an incorporated association. Although, you will need one if you fall under certain tax obligations.
Registering your Association
To register your association, you need to lodge a form with the relevant office of your state. In NSW, this is the Fair Trading Office and the public officer must lodge the form. The public officer can send the form through email, mail, or in person at any Service NSW Centre. Furthermore, the association will need to pay fees to become registered.
When you register your association, you need to choose a name. The name cannot be the same or too similar to a name of an existing association. For a list of current associations in NSW, click here.
Cancelling an Association
Maybe learning how to cancel an association seems odd in an article about starting one. Bear with me. Some people may be put off starting an association if they don’t know how to back out of one. To cancel an incorporated association, it needs to be agreed upon by the members through a special resolution. Afterwards, you can submit an application to the relevant state department and they will handle the rest. Some of the association’s financial information may be needed. If your corporation has any assets, you will also need to decide beforehand what happens to them. The asset’s distribution needs to be given the ok by the secretary and cannot be designed to give benefits to past or current members.
Conclusion
If you have no plans to incorporate your association, all you need to do is find like minded people. However, there are a few things you need to do to make your association incorporated. Luckily, most of them are fairly easy to meet. When you have met the requirements, register your association with your state’s relevant department. Once incorporated, the association also needs to comply with various obligations created under the relevant state legislation.
