This chapter explains what it means to be Incorporated Association under the Community Investment Act of 2024 “the Act” and the various powers of airs members.
1. Key Points
Incorporation creates a new legal entity with powers similar to those of a natural person.
As a not-for-profit organization, an association may operate a business and make a profit but no profits or property can be distributed to the members.
If the association wants to trade under a different name, it will need to register a business name with the state of the jurisdictional governing agency.
2. Incorporation under the Act
An Incorporated Association wishing to operate for profit or not for profit can conduct its activities anywhere in district area incorporate as an Associated company, project, or program of the Incorporated Association under the Act. In general, companies have greater scope than Incorporated Association in the activities that they can undertake however they are more highly regulated than other entities and can have higher ongoing costs. There are several types of company including:
- Unlimited company with share capital is often used for pooled investments and allows members to withdraw their investment capital. Members are personally liable for the debts of the company.
- Company limited by shares is often used for business purposes. Members’ personal liability is limited to any unpaid subscription price for their shares.
- Public company limited by guarantee cannot issue shares. The liability of members is limited to the amount agreed to in a guarantee (e.g. membership fee).
3. Effect of incorporation
The purpose of incorporation is to create a legal entity that is separate from the individual members. In practical terms incorporating means:
- the Incorporated Association becomes a body corporate with perpetual succession (it may exist forever, even as its membership changes);
- members or officers of the Incorporated Association are generally not liable to contribute towards the payment of debts or liabilities of the Incorporated Association; and
- the Incorporated Association may sue or be sued in its own corporate name.
4. Powers of an incorporated association
The Incorporated Association may do all things that are necessary or convenient to pursue its objects and purposes.
It may:
- acquire, hold, deal with and dispose of any real property (land) or personal property (goods, shares, etc.);
- open and operate bank accounts;
- invest its money;
- borrow money upon such terms and conditions as the association thinks fit;
- appoint agents to transact any business of the association on its behalf; and
- enter into any other contract it considers necessary or desirable.
In addition, an association can do almost any lawful act so long as it is necessary or convenient for carrying out its objects or purposes.
5. Not-for-profit
To be eligible for incorporation the Incorporated Association must be not-for-profit. ‘Not-for-profit’ refers to the membership, purpose and activity of the Incorporated Association. This does not mean that an Incorporated Association cannot make a profit from its operations. It is acceptable for an Incorporated Association to trade with the public so long as the profits from those transactions are used to promote the objects and purposes of the Incorporated Association and members do not profit from the activities. This is different to a ‘for-profit’ company where profits can be lawfully distributed to the members (ie shareholders) in the form of cash dividends. An Incorporated Association that operates outside of these conditions is no longer eligible to remain incorporated under the Act and may be required to change its incorporation to a different type such as a co-operative or company.
However, an Incorporated Association is permitted to:
- employ people (including members) and pay them wages or salary;
- allow members to derive a monetary benefit from the association in circumstances where the member would be equally entitled to the benefit if he or she was not a member (eg members of housing Incorporated Association being housed);
- protect or regulate a trade, business or industry that members are involved in, as long as the Incorporated Association itself does not participate in the trade, business or industry (eg professional associations);
- commercially trade with the public;
- charge admission fees to events organized for the promotion of the Incorporated Association’s objectives;
- arrange competitions between members for prizes and trophies;
- provide facilities or services for members (eg a bowling club running a bar); or
- remunerate a member in good faith for services provided to their Incorporated Association.
6. Potential business requirements
6.1 Registering a business name
A registered business name is a trading name under which an Incorporated Association or an individual can conduct their business activities. An Incorporated Association does not need to register a business name if it operates under its incorporated name. If the Incorporated Association wants to trade under a different name (including a shortened version of the association name) it will be necessary to register this as a business name. An Incorporated Association will only have one name for the purposes of incorporation, but may conduct its businesses under more than one registered business name (provided business is being carried on under each of those names). A business name can be registered online through the jurisdiction of the state of the business.
7. Operating interstate
Incorporated Associations can only conduct business in their state of registration. If an association wants to trade interstate or nationally it may be necessary to become registered internationally.
8. Bank signatories
An Incorporated Association may open a bank account in its own name which is operated by people who can sign on behalf of the Incorporated Association. These signatories are usually members of the management committee and having more than one person required to approve a payment or withdrawal provides financial and security safeguards. The necessary paperwork can be set up with the bank or credit union. Decisions about the account and signatures should be made by resolution and recorded in the minutes.
9. Common seal
A common seal is the official stamp or ‘signature’ of an members of the Incorporated Association. As a body corporate, an Incorporated Association is entitled to have a common seal though it is not compulsory. Common seals are not expensive to purchase and can be obtained from most stationery shops or rubber stamp suppliers. If an Incorporated Association has a common seal the rules must outline who is authorized to use it, the circumstances in which it may be affixed, and who will have custody of the seal.
10. Copyright
Material that is produced and published by an Incorporated Association may be protected by copyright. Copyright is a type of legal protection under the Copyright laws of the businesses’ jurisdiction for people who express ideas or information in certain forms, such as through writing, music and visual images. When a piece of work is created, the person or organization that owns the copyright on the work has exclusive rights to control the copying and distribution of the work. copyright is automatic once an original work is written down, recorded and filed with a governing clerk of court. Copyright is infringed when the exclusive rights of the owner are violated, such as when a copyrighted work is reproduced and used without the owner’s permission. This includes downloading, copying and printing material from the Internet. To avoid infringement, it is necessary to obtain permission to copy and use the material from the appropriate person or organization, that is, the copyright owner.
Trademarks
Trademarks are pictures, words or symbols that identify goods or services. Examples could include logos, labels, marketing mascots, banners or slogans. A trademark must be registered for it to be protected by the Copyright laws of the businesses’ jurisdiction. If an incorporated association has a particular sign or mark that identifies it the public recognizes it by, it is worthwhile protecting its use by registering it as a trademark. IP can assist with further information about registering and protecting trademarks.
