Each Australian state has Associations legislation and Victoria's Act is one of the better examples. The Associations Incorporation Act 1981 (Vic) ("Associations Act") provides for a system where community organisations may formalise their association in a manner recognised by the law. This then creates a number of benefits for the group, but also a number of possible difficulties. The relative merits of incorporation and how it is achieved are the principal areas covered in this chapter.

The advantages of incorporation are:

Disadvantages of incorporation are that the Associations Act imposes certain obligations and costs, which are designed to protect the interests of members. These are not onerous, but should be taken into account:

Full details relating to the process of incorporation and the administration of incorporated associations are provided separately below.

Groups are free to decide against a formal structure. In the eyes of the law, the group will remain a collection of individuals; the law will (generally) not recognise the group as a separate entity. This could well mean very little to many people, as in their eyes they will readily identify the existence of the group and its operation separate to the individuals that constitute it.

Despite the fact that there is little formal structure required of unincorporated associations, most groups will, as a minimum, need to choose a collective name and adopt Rules of Association that will set out such things as: the objects of the association, membership qualifications, subscription fees, management of meetings, financial matters, dissolution and amendment of the Rules.

Although officers of the organisation will be personally liable for its obligations, this can, in practice, be limited by indemnification (insurance).

The advantages of unincorporated associations are that the structure is very flexible and the least costly and time consuming of any form of organisational structure.

The disadvantages of such associations are:

Generally, the advantages of incorporated associations are the disadvantages of unincorporated associations. Given the benefits of incorporation, however, this form of organisational structure will not be considered further in this chapter.

Groups may incorporate under the provisions of the Corporations Act 2001 (Cth) ("Corporations Act"). A group may incorporate in a number of ways, including:

Only the last of these options will be discussed further here (the relatively complex administration of the first two makes them unattractive to most community groups).

A community organisation could achieve the status of a corporation (thus achieving limited liability) by forming itself as a company limited by guarantee under the Corporations Act. This means that the members guarantee to pay a fixed but nominal amount in the event of the liquidation of the company. In general, a company's internal management must be governed by:

A Board of Directors must be appointed, and the various requirements of the Corporations Act (especially in relation to meetings and the lodgment of accounts) must also be observed. Also bear in mind that no matter how small a company is, it needs an auditor.

However, most community organisations will not use this structure. This is mainly because it is more expensive to register this form of corporate body than it is to register an incorporated association and the compliance costs are also greater. It may be a useful option, however, if the form of an incorporated association is unsuitable. For example, if your group wishes to carry on business outside Victoria it may be more efficient to incorporate under the Corporations Act.

There are two forms of co-operatives: trading and non-trading (which may issue shares, not issue shares, or be guaranteed by the government).

A trading co-operative should be formed if members will receive a share of any surplus funds or a return on capital if the co-operative is wound up.

A non-trading co-operative should be formed if any surplus is not distributed through shares, or if members would receive only the original value of their shares on a winding up. Only a non-trading co-operative would be considered a non-profit organisation.

Some groups may be able to register as a co-operative under the Co-operatives Act 1996 (Vic) ("Co-operatives Act"). This Act provides that a group may register as a co-operative if the Registrar of Co-operatives is satisfied that the registration requirements have been met.

The obligations and costs that apply to the registration of a co-operative are similar to those that apply to registration of an incorporated association. The fee to apply for registration as at 1 July 2009 is $146.10. Further information about fees is available from the Consumer Affairs Victoria (CAV) website at www.consumer.vic.gov.au.

For groups that have a common service motivation and pool money for the members' mutual benefit, this form of incorporation is highly suitable. The Co-operatives Act bestows limited liability on co-operatives, which means that the co-operative has a separate legal identity, distinct from that of its members. It may sue and be sued in its corporate name and has the power to acquire, lease, hold, sell and dispose of property. It also has the power to form unit trusts or partnerships and enter into joint ventures.

Apart from these legal considerations there can, of course, be other non-legal considerations. These include the following.