Setup
Incorporated Association vs Company Limited by Guarantee
Incorporated association vs company limited by guarantee — a plain-English comparison to help Australian community groups choose the right structure.
For most small community groups, an incorporated association is the right choice. If you operate nationally, need to raise significant funds across state lines, or have a complex governance structure, a company limited by guarantee may be worth considering.
This is general information, not legal advice. Choosing a legal structure has significant implications for your group. Seek professional legal or accounting advice before making a decision.
The basics
Both structures give your group a legal identity separate from its members. That means the group can hold property, sign contracts, and be sued — without exposing individual members to personal liability (with some exceptions).
The key difference is the law that governs them:
- Incorporated association — incorporated under your state or territory's Associations Incorporation Act (in Victoria, the Associations Incorporation Reform Act 2012). Regulated by the relevant state body (in Victoria, Consumer Affairs Victoria).
- Company limited by guarantee (CLG) — incorporated under the federal Corporations Act 2001. Regulated by the Australian Securities and Investments Commission (ASIC).
See starting a community group for an overview of what incorporation involves and the steps to get there.
Incorporated associations — pros and cons
Why most small groups choose this structure
- Simpler and cheaper to set up — state fees are typically lower than ASIC fees
- Less compliance reporting for small groups
- Model rules available from your state regulator — you do not have to write a constitution from scratch
- Well understood by local councils, grant-makers, and community banks
The limitations
- Incorporated in one state — if you operate significantly in other states, you may need to register as a foreign association in each one, which adds complexity
- Not suitable for some federal grant programs that require a company structure
- Some institutional funders (particularly large government grants) require a CLG or ask about your governance structure in ways that suit CLGs better
Company limited by guarantee — pros and cons
When it makes sense
- Your organisation operates nationally or plans to
- You need to accept donations under a Deductible Gift Recipient (DGR) endorsement that requires a specific company structure
- Your governance needs are complex — larger boards, multiple classes of membership, fundraising across jurisdictions
- Certain federal grant programs or corporate partners require it
The trade-offs
- Higher set-up and ongoing compliance costs (ASIC annual review fees, more formal reporting)
- A constitution (called a constitution, not rules) must be drafted — model constitutions exist but they are more complex than state model rules
- Director duties under the Corporations Act are stricter and more detailed than those under most state association acts
ACNC registration — relevant for both
If your organisation is a charity, you can register with the Australian Charities and Not-for-profits Commission (ACNC) regardless of your legal structure. ACNC registration brings reporting obligations but also provides access to charity tax concessions and publicly demonstrates your accountability to donors and funders.
Neither structure automatically qualifies you for charity status — that is a separate assessment based on what your organisation does.
Questions to ask before choosing
- Where do we operate? Mostly local or one state — incorporated association. Nationally or across multiple states from the start — consider a CLG.
- Who are our funders? Check the eligibility criteria for grants you plan to apply for before you incorporate.
- How large is our committee? A small volunteer committee is well suited to association governance. A large or paid board may be better served by Corporations Act structures.
- What are our growth plans? If you are starting small but expect to scale significantly, consider the cost of conversion later.
If you are unsure, a lawyer or accountant experienced in the not-for-profit sector can assess your specific situation and help you choose the right structure before you commit.
If you want to see how Swoop supports community groups across different structures and sizes, book a yarn and we can talk through what suits your group.
Common questions
- What is the main difference between an incorporated association and a company limited by guarantee?
- An incorporated association is incorporated under state or territory law and is best suited to groups operating mainly within one jurisdiction. A company limited by guarantee is incorporated under federal law (the Corporations Act) and is better for groups operating nationally or needing to raise funds across state borders.
- Which structure is more common for small community groups?
- Incorporated associations are more common for small local groups. They are simpler to set up, cheaper to run, and regulated at the state level — which usually means less compliance paperwork for a group that operates locally.
- Can an incorporated association become a company limited by guarantee?
- Yes, it is possible to convert, but the process is complex and involves winding up the incorporated association and forming a new company. Taking legal advice before attempting a conversion is strongly recommended.
- Does a company limited by guarantee have shareholders?
- No. Members guarantee a small fixed amount (usually 0) to cover the company's debts if it is wound up. There are no shares and no dividends — profits must be applied to the organisation's purpose.
- Do both structures qualify for tax concessions?
- Having either structure does not automatically make you tax-exempt. You need to apply for tax concessions separately with the ATO. ACNC registration is required for charity status and the associated benefits.