Corporation purpose
Your corporation’s purpose is its why and what – why it exists; why it was established; what it aims to do and who for.
Some corporations have a distinct background, origin story or founding person that explains how the corporation came to be and informs its identity and goals, such as activism, advocacy or a need to protect. For example, corporations formed to hold and manage native title rights and interests secured through a native title claim. Other corporations may not have such distinct reasons for forming but there is usually an original need or aspiration that should be honoured into the future.
Having a clear purpose that is well understood helps boards and management drive their corporation forward. All of the corporation’s activities should further its purpose either directly or indirectly.
For-profit or not-for-profit
Every corporation must decide whether it will structure itself to operate on a for-profit or not-for-profit basis.
A for-profit corporation’s purpose or main goal is to earn income and profit for its owners. This type of corporation usually sells products or services to generate wealth for its owners. They might keep the money, share it with owners or investors, or reinvest it.
A not-for-profit corporation’s purpose is to provide social value through services or benefits to the community. They aim to improve or fulfil the needs of society. Any profits that a not-for-profit corporation makes cannot be shared with members. They must have a rule to ensure profits can only be used in furthering the corporation’s objectives
It can sometimes be hard to distinguish the type of legal structure from a corporation’s operations as many not-for-profits provide goods or services competing with for-profit organisations, with the intention of generating profit to fund its social objectives.
Charities
‘Charity’ has a technical legal meaning. To be recognised as a charity a corporation must:
- be not-for-profit
- have only charitable purposes that are for the public benefit
- not have a disqualifying purpose
- not be an individual, a political party or a government entity.
'Charitable purpose' has a special legal meaning, developed over the years by the courts and parliament. There are 12 charitable purposes listed in the Charities Act 2013.
Your corporation must apply to the Australian Charities and Not-for-profits Commission (ACNC) to be registered as a charity. If the ACNC decides your purposes are charitable they will register your corporation with a charity ‘subtype’. The subtype can affect the tax concessions available to your corporation.
A corporation that is, or plans to become, a charity must include specific rules in its rule book.
For more on charities see the ACNC website: legal meaning of charity
Registered Native Title Body Corporate
A corporation that is an RNTBC has a special purpose to hold and manage native title rights and interests for common law holders of native title.
A corporation that is, or plans to become, an RNTBC must include specific rules in its tule book.
More information
Depending on how the corporation is registered, it will have certain reporting requirements.