Starting and Registering a Not For Profit

How to start a not-for-profit

Starting a not-for-profit (NFP) organisation can be a challenging task for anyone.

There are a variety of tasks you need to be across including possible legal structures, tax concessions, registration, and endorsement. In this blog, we will break down the steps to show you how to start a not-for-profit.

First and foremost, before starting a not-for-profit, the purpose of the new organisation must be well considered. How do you envision its achievements, activities, services, size, target audience and duration of its existence?  There must be clarity and alignment among the new team for the not-for-profit to have a strong initial foundation.

You must choose a legal structure that meets your organisation’s long-term needs. Your not-for-profit’s legal structure will affect its legal identity, leadership structure, debt management, and compliance obligations. Choosing the incorrect structure may result in legal issues down the track.

An incorporated association is the most common legal structure in Australia for registered charities. It is an organisation incorporated under state or territory law that establishes itself as a legal entity (separate from its individual members).

However there are other options, so it is important that this decision is well considered.

Unincorporated associations for example refer to individuals who aim to further their purpose without creating a distinct, legal identity. These not-for-profit organisations don’t include the legal terms “Ltd,” “Limited,” or “Incorporated” in their names.

Once you decide your NFP’s legal structure, the next logical step is to get an Australian Business Number (ABN). An ABN is the primary identifier of your organisation with government departments, including the Australian Taxation Office (ATO).

Keep in mind that the government requires only NFPs to have an ABN if they have a turnover of more than $150,000. So potentially, an ABN is something you could postpone if you have moderate revenue expectations.

The ATO will supply your not-for-profit organisation with a tax file number (TFN) if it deems your NFP must file an income tax return. Your organisation can simultaneously apply for an ABN and TFN.

Next, your NFP must apply for business name registration. Here’s how to register a not-for-profit organisation as a company or incorporated association.

 

  • Registering as a company: You must register with the Australian Securities and Investments Commission (ASIC) if you run a company (Pty Ltd) and want to use a name other than your company’s to transact business. If your NFP operates in several states and territories, it’s not necessary for you to register separately in every state or territory.

If you use a name other than your own for business purposes, you must also apply for business name registration.

If you register your NFP as a company, it becomes a separate legal entity from its members. Consequently, the company can own property and file or defend lawsuits.

 

  • Registering as an incorporated association: In this scenario, your not-for-profit organisation is also a legal entity separate from its members.

An incorporated association structure generally works better for smaller community organisations because they are simpler and more economical than their company counterparts.

You can only operate in the Australian state where you registered your incorporated association. To conduct business outside your state or territory, you must register your incorporated association as an Australian registered body.

Not-for-profit organisations’ tax concessions depend on their type. Some of the tax concessions they can access include income tax exemption, fringe benefits tax (FBT), and goods and services tax (GST) and deductible gift recipient (DGR) endorsements.

However, please note:

  • Charities: If your NFP applies for charitable status, the Australian Taxation Office (ATO) must endorse it to qualify for tax benefits.

  • Other NFP organisations: These NFPs can generally determine their tax concessions.

Accounting systems for not-for-profit  

Today, many NFPs entrust their accounting to reliable accounting services. Bookkeeping for not-for-profit organisations helps reduce expenses, accelerate finance transformation, gain access to specialised accounting knowledge, and benefit from the expertise of qualified professionals. 

Giuntabell is your trusted NFP accounting partner. We help improve your organisation’s financial resources and risk management processes so you make sound decisions that serve your purpose.

We are your virtual not-for-profit CFO, helping you deliver strong financial outcomes for your NFP’s. Our company also offers company secretarial services that help your organisation streamline its processes and guarantee not-for-profit compliance.

Contact us today to start a conversation about your NFP’s accounting system.

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