Before You Start a Not-For-Profit Organisation, Here’s 5 Things You Should Consider
Thinking about starting a Not-For-Profit Organisation? While it's a noble goal, there are many legal things you need to consider. Read about them here.
So you’ve decided that it’s time to give back, or you’ve found a cause you’re truly passionate about and want to act now. Either way, while starting a Not-For-Profit Organisation is a noble venture, it is also not an easy one to undertake successfully. Successfully running a Not-For-Profit Organisation requires not only careful consideration of your organisation’s purpose, but also meticulous planning.
Read on for some helpful tips to make sure you start your Not-For-Profit Organisation the right way.
The Difference between a Charity and a Not-For-Profit Organisation
A Not-For-Profit Organisation is a broad term which simply describes an organisation which is run for its own purpose and not for financial gain. Within this, Not-For-Profit Organisations are categorised as charities and other organisations (such as sporting and rotary clubs).
Charities raise funds for specific causes, whereas other Not-For-Profit Organisations tend to have more community-based goals. In addition, charities have stricter standards by which they can operate as they have to demonstrably be for the ‘public benefit’.
Having a Good Idea of what you want your Organisation to Achieve
It is likely that you already have a good idea of what you want your Not-For-Profit Organisation to achieve. However, if you do not, it is important to make an assessment of where a need exists for a Not-For-Profit Organisation like yours. The Not-For-Profit Organisation industry is competitive, with larger organisations (think World Vision or Oxfam) having a large share of the market.
Once you have outlined your vision for your organisation, write up a list of specific goals such as fundraising targets and how you will distribute these funds. Further, you should also decide whether you want your organisation to be locally-based, or have overseas partners. If you have overseas partners, or if your organisation will be in an overseas market, be weary of the specific tax and legal requirements for the country you wish to operate in.
Registration with the Australian Charities and Not-for-profits Commission (ACNC)
If you want your organisation to be given tax concessions, or accept tax-deductible donations, you must be registered with the Australian Charities and Not-for-profits Commission (ACNC) and be recognised as a Deductible Gift Recipient (DGR). If you do not register, then your organisation will be liable to pay normal income tax rates. To be able to apply for these and other tax exemptions (such as fringe benefits or GST) you will also have to apply for an Australian Business Number (ABN). Further, if your organisation will be providing services, you may have to register your organisation as a company.
Establishing a Board
The legal structures of Not-For-Profit Organisations vary, however, one thing they have in common is that they usually have a board to make decisions and oversee how the organisation operates. When choosing the board, be sure to choose people who are passionate about the space that the organisation is working in and have experience. Having a board will provide a wider range of perspectives when making significant decisions.
It is also important to note that the board will govern the organisation, but will not be ‘on the ground’ themselves running the organisation. That will be the role of the volunteers and staff that the board chooses to hire.
How you will have Transparent and Efficient Administrative Processes
It is well-known that companies have mandatory obligations to report their accounting to ASIC, and Not-For-Profit Organisations aren’t too different. Not-For-Profit Organisations have to disclose their tax details to the Government, but where Not-For-Profit Organisations have to really be careful is their manner of fundraising.
Fundraising laws provide specific standards which have to be met when fundraising, and also impose strict penalties for organisations that engage in misleading or deceptive conduct when collecting donations. However, the laws vary in each state, and sometimes the stricter requirements only apply to charities, and not Not-For-Profit Organisations as a whole. If you’re unsure of what obligations apply to your organisation, a Not-For-Profit Lawyer can advise you in relation to your specific circumstances.
Starting a Not-For-Profit Organisation can be a great way to make a positive contribution to society, and the world at large. However, it is important to adhere to all the legal and reporting requirements – and this is often easier said than done.
Jackie is the Content Manager at Lawpath and manages the content team. She has a Law/Arts (Politics) degree from Macquarie University and is an admitted solicitor in the Supreme Court of NSW. She's interested in how technology can help shape the future legal landscape.