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Incorporated associations

Why incorporate

What is Incorporation?
Advantages and Disadvantages
Deciding whether to Incorporate

What is Incorporation

Incorporation is a system of registration that gives an association certain legal advantages in return for accepting certain legal responsibilities.

Incorporated Associations:

• Have their own 'corporate identity';
• Can sue and be sued;
• Can enter into contracts;
• Mostly appoint committees to run affairs; and
• Provide documents for a public register.

Incorporation under the provisions of the Associations Incorporation Act 1964 is available to any association that is formed for:

• a religious, educational, benevolent or charitable purpose;
• the purpose of providing medical treatment or attention;
• the purpose of promoting or encouraging literature, science or art;
• the purpose of recreation or amusement;
• the purpose of establishing, managing, carrying on or beautifying a community centre;
• the purpose of administering superannuation schemes;
• promoting any of the purposes previously mentioned or for any similar purposes.

If the objects for which an association has been formed do not fall within any of the provisions of the above list it is possible the association cannot be incorporated under the Act and another form of incorporation (e.g. as a public company) will be necessary.  Appropriate legal advice should be sought in these instances.

If the association wishes to establish an office or carry on business in another state, it should either incorporate in the other state, or consider formal application for registration as a Registered Australian Body.  This application should be made with the Australian Securities & Investments Commission.  Contact details for all Australian jurisdictions can be found under 'Business Affairs' in our Useful Links.

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Advantages and Disadvantages

One of the principal reasons for incorporation is to gain the benefits of limited liability.  Section 27 of the Act provides as follows:

'A member of an incorporated association is not liable, except as provided in the rules of the association, to contribute towards the payment of the debts and liabilities of the association or the costs, charges and expenses of a winding up of the association.'

However, circumstances are possible where members of an incorporated association can be exposed to unlimited liability.  If members of an association are in any doubt as to the extent to which this section will be effective in limiting their liability they should consult their legal advisers.  The assumption that incorporation removes the need to effect public liability insurance may be unwise and any decision not to insure should be discussed with the association's legal adviser.

There are a number of advantages to not being incorporated.  These include:

• ease of dissolution as there are no statutory obligations;
• privacy of affairs as accounts and financial statements are not subject to public scrutiny as in the case of incorporated associations;
• an unincorporated association which 'carries on business' in other States of Territories does not encounter company registration problems as does an incorporated association;
• it is not necessary to appoint a public officer, which is a statutory requirement for incorporated associations;
• it may be difficult to sue people in relation to a wrong committed by an unincorporated association. 

However, there are also problems in being an unincorporated association.  A number of problem areas are discussed below.

In relation to contracts, the law sees a contract made with an unincorporated association as either:

• a contract with the members of the committee personally at the time the contract was made; or
• if it is clear that no personal contract was intended, no contract at all.

There is therefore risk that if a contract dispute comes before a court, the association may find a contract it is relying on is unenforceable; and a court may hold that the secretary or members of the committee are personally liable if a contract has been breached.

In relation to ownership of land, registration cannot be in the name of an unincorporated association but by all the members, which can create a difficulty as new members join.  If incorporated, title to land is vested in the name of the association as a separate legal entity.

In relation to liability, generally the members of the committee of an unincorporated association will be personally liable for anything for which, if the association were a company, the company would be liable.  In particular if some person acting in the course of their duties does some negligent act, which results in damage to person or property, the members of the committee will normally be personally responsible - risks of this kind can be covered by insurance.  If incorporated, an insurance policy can be taken out in the name of an association and this covers at least part of the legal liability.  However, you should note that at times these insurance policies are difficult to obtain.

In relation to litigation, an unincorporated association cannot sue or be sued in the name of the association.  Any action taken must be in the name of individuals on behalf of the members of the committee and, for reasons already given, many actions have not been successful.  If incorporated, any action in law is taken out in the name of an association as a separate legal identity.

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Deciding whether to Incorporate

An association should consider consulting a solicitor if, as an unincorporated association:

• trustees own land on it's behalf;
• activities of the association involve any real risk of personal injury or of any other claim for damages;
• the association wishes to receive funds from a government body or other fund which requires (as many will) incorporation before it will give money;
• it proposes to enter into important contracts, eg for government funding.

Advice may need to be sought on the legal liability of the Committee or other members of the Association.

If a body wishes to seek funding from an outside source, there is information about grants available to not-for-profit organisations.  Please view:

Arts Grants and Loans Programs

Sport and Recreation Grants

Women Tasmania Small Grants Program