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Help Sheet

Starting up a not-for-profit organisation

You have a concern, or an interest, that's shared by other people. You want to do something, or promote something, or change something, at least partly for the benefit of people other than you. Do you have what it takes to start and run a new organisation?

Why set up an organisation?

You don't have to be part of an organisation - you can go it alone, and many successful people have. You can do informal ring-arounds when anything needs to be done, and avoid getting bogged down in structures.

A formal organisation can, however, be a powerful way of getting your message across or organising your activities.

Do you really need a new organisation?

The first thing to do is to check that nobody's doing your thing already. If there already is an organisation working in the field, would it be better to join it? If the other body isn't doing quite what you want, can you get it to change? Will it be able to stretch to cover your interests? Could it handle a spin-off, or a sub-committee? Don't start up a new competitor unless you have to. There may be a need for two agencies, and there may even be room for two agencies, but on the other hand there may not. Starting up your own association should be a last resort only. Check out the community environment thoroughly and systematically (you'll need that information if you decide to go ahead, anyway).

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Do you need to become a legal entity?

Ten people sitting around a table saying "We must do something about this!" are in the eyes of the law an unincorporated association, which for most purposes means no more than just six or so individuals sitting around a table. There's nothing illegal about being an unincorporated association, but it's not a legal entity - that is, nobody else need bother about addressing you as the Australian Doing Something About This Association (ADSATA) rather than as Allan, Denis, Sam, Amy, Thuy and Alison.

If you're the honorary treasurer of an unincorporated not-for-profit organisation called ADSATA, for example, and you're renting premises for your organisation, you will have to make the lease in your own name.

If you're a small organisation for simple purposes, you may be able to leave it at that. There's absolutely nothing to stop Allan, Denis, Sam, Amy, Thuy and Alison - or even Allan all by himself - from having ADSATA letterheads printed and sending out press releases, reports, and urgent letters to parliamentarians (as long as they aren't libellous or seditious or otherwise suspect). If you want to organise a demonstration in a tearing hurry this might be the best you can do.

An unincorporated association isn't entirely without legal effect. If someone comes along at the demonstration and says "Here's a thousand dollars for ADSATA," then Allan holds that money in trust for the purposes of ADSATA and isn't allowed to use it to repaint his garage. Otherwise, however, you have very few legal responsibilities and very little supervision. You don't have to be organised in any particular way, or follow any particular procedures. You'll basically have the obligation to act as a trustee for the organisation's purposes, but you can be flexible about what you do and how you do it.

The advantages of being an informal group are that you don't have to pay the costs associated with incorporation and you don't have to comply with many of the requirements or fill out the forms imposed on corporations.

The disadvantage is that if anything goes wrong - if the ADSATA office burns down, or if people fall over the mat and injure themselves and sue - it's possible that as the lessee and as a committee member you may be held personally liable. In that case if there isn't enough money in the ADSATA cashbox to cover the payout you may have to pay for it yourself.

There can also be difficulties with opening bank accounts, problems with insurance, and confusion about who owns what property. If you stop being a member of ADSATA but your name is still on the contracts there may be difficulties transferring your responsibilities to the new treasurer.

Furthermore, most foundations and most government departments will only fund organisations that have legal personality.

Formal structures

If you want to do anything very ambitious - anything that involves raising money from the public at large, for example, or applying for grants, or buying or selling property - then you will want to gain official recognition. If your organisation has (for example) registered itself under the Associations Act and has a legal personality, and you're renting premises, then

If something does go badly wrong with your association, somebody is quite possibly going to be sued. The first step is to make sure that it isn't going to be any of you. The point about becoming a corporation (whether an incorporated association or a co-operative or a company) is that it creates something else that can be sued, and this has the effect of drawing fire away from members of the group as individuals. This protection isn't absolute, but it helps.

If you've decided to seek legal status, see here.

What administrative systems do you need?

If you're starting up a not-for-profit, you'll probably need to sort out several sets of policies and practices in different areas.

You need:

For more details on these administrative basics, see here.


P.S. If you found this article helpful, you'll love our regular email newsletter - Our Community Matters. Subscribe today and join the many thousands who already receive this free, essential reading for not-for-profits.


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