Incorporation benefits and options

Check if starting a corporation is right for you

You might be forming a corporation to hold title to land, to undertake a project or because you have an exciting business venture in mind.

Whatever your reasons, it takes time, effort and commitment to start a corporation. Make sure you get to know:

what's involved
whether it's right for you.

Starting a corporation can go more smoothly when:

your group has the wide range of skills, like business, personal and interpersonal skills, needed to run a corporation
you’re committed to working a lot of hours and weekends, and through challenging times
you know how you’ll fund your activities.

Business structures

The business structure is the way a business is legally organised.

Your choice of business structure will determine things like what law you need to follow, who makes decisions, who is responsible if there are debts or legal troubles, who gets any profits and how much tax you pay.

There are 4 common legal structures in Australia:

sole trader
partnership
companies and other incorporated entities
trust.

Find out more about different business structures at business.gov.au.

What it means to incorporate

Establishing a separate legal entity from its members is called ‘incorporating’. Aboriginal and Torres Strait Islander corporations are formed by a process.

To incorporate you must meet the requirements and follow the legal process to create a legal body. When it is registered, a legal entity is formed and is treated like a natural (real) person.

A corporation can do many things that a real person can do, such as:

buy and sell property and assets
apply for and obtain government funding
enter into contracts
incur debts and liabilities
sue and be sued.

The corporation is a separate legal entity. It:

owns the property and assets. The members or directors do not own those things.
is responsible for its own debts, liabilities and commitments.

Why incorporate?

The main advantages of incorporating are:

protection from liabilities for members
taxation benefits
better reputation for your business because everyone knows it has standards of governance it has to meet
makes it easier to access capital (e.g. bank loans, government grants or other investors) and therefore help your business grow
the corporation continues to exist even if the person or people who started it are no longer involved (succession is easier – the corporation exists even if you pass away or retire)
effective management processes – corporations have internal structures where decision-making powers are given to a smaller group with oversight from another.

Incorporation options

There are different laws for incorporating companies and other incorporated entities:

Corporations Act 2001 (Cth)
Corporations (Aboriginal and Torres Strait Islander) Act 2006 (Cth) (CATSI Act)
different state and territory incorporated associations laws
state, territory and national cooperatives laws.

Most groups that want to incorporate can choose which law they want to follow. However registered native title bodies corporate (RNTBCs) cannot choose.

The Native Title Act 1993 says that the only type of the body corporate that can be prescribed in a determination of native title is an Aboriginal and Torres Strait Islander corporation. This is because the CATSI Act has special rules to deal with the special roles and responsibilities of a registered native title body corporate and the conflicting obligations between native title law and corporate law.

To be eligible for some registrations or some types of funding a government may require an organisation to be registered under a particular law, such as Registered Aboriginal Parties in Victoria.

Unique features of the CATSI Act

The CATSI Act is similar to, but not the same as, the Corporations Act. The CATSI Act has some unique features for Aboriginal and Torres Strait Islander groups:

Indigeneity – the majority of members and majority of directors must be Aboriginal or Torres Strait Islander people.
Internal governance rules – the corporation’s rules must meet minimum standards of governance.
Community purpose – some types of organisations cannot register under the CATSI Act, for example, trade unions and corporations giving financial services.
Corporate membership – bodies corporate or peak bodies can become members.
Specialised assistance – ORIC can assist corporations, unlike other regulators.
Special regulatory powers – ORIC has the power to appoint examiners and administrators.

Benefits of registering under the CATSI Act

The CATSI Act was passe din 2006 to meet the unique incorporation needs of Aboriginal and Torres Strait Islander corporations. It also established ORIC to regulate entities under the Act.

Benefits to becoming a corporation under the CATSI Act include:

members can choose to not be liable for the corporation’s debts
you can choose to include relevant rules in your own rule book, such as rules relevant to your culture or community
you can operate nationally – you’re not limited to the state or territory where you’re registered
no fees to lodge forms, documents and reports
access to information and support including training
you can choose how you use profits – if your rule book allows, the corporation' profits can go to members.