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If you’re setting up as a not‐for‐profit but still want the benefits of a company structure, you can establish a not‐for‐profit company. This option is particularly appealing in 2025, as it offers you a streamlined corporate framework while ensuring your operations remain dedicated solely to a charitable purpose.
So, where do you even begin?
In this article, we’ll answer the following questions about not‐for‐profit companies:
- What legal structures are available for not‐for‐profits?
- What actually is a not‐for‐profit company?
- Is a not‐for‐profit company the right legal structure for your venture?
- How does a not‐for‐profit company differ from a company limited by guarantee?
Choosing The Right Legal Structure For Your Not‐For‐Profit
In 2025, it’s more important than ever to set up your not‐for‐profit correctly. Choosing the right legal structure can be challenging – especially for NFPs where there isn’t a one‐size‐fits‐all approach in Australia. With evolving regulatory requirements from bodies like ASIC and the ACNC, ensuring your organisation is properly structured will help mitigate risks and enable sustainable growth. For further insights into why the choice of your business structure matters, be sure to check out our latest guides.
There are several NFP structures available, and the one you choose depends on your organisation’s aims. For example, if you’re establishing a traditional charity, you might review our guidance on setting up a charity legal structure. Alternatively, if you’re launching a social enterprise, our article on navigating social enterprise structures can help you understand your options.
When choosing the right structure for your NFP, ask yourself:
- Will I be running the organisation with a charitable purpose?
- What is my current budget and projected funding?
- How much administrative responsibility am I prepared to undertake?
- What are my long‐term objectives with this structure?
- How do I envision the growth and evolution of my organisation?
If none of the traditional structures suit your needs, it might be worth considering a not‐for‐profit company – a setup that is increasingly popular in 2025 for organisations seeking a blend of corporate efficiency and a dedicated charitable focus.
What Is A Not‐For‐Profit Company?
This structure isn’t as common as some others, so let’s break down how it works in today’s regulatory landscape.
One option is to set up a private (Pty Ltd) company. This means you establish a separate legal entity, limited by shares, which operates exclusively for charitable causes. While you’ll have shareholders and directors, the organisation’s income is reinvested solely to further its charitable objectives.
A major advantage is limited liability – your personal assets (and those of your founders) are protected, as the company is a separate legal entity. For more details on how legal structures can impact your risk management, check out our article on legal tips for startups and small businesses.
It is important to note that while setting up as a not‐for‐profit company offers significant benefits, it can be more costly than some other structures. In recent updates, ASIC fees for a Public Company Limited by Guarantee (CLG) have increased to around $1,500 per annum. However, if you qualify as a not‐for‐profit company under the special purpose provisions, your annual review fees are significantly lower – averaging approximately $55 per annum in 2025. This represents a considerable saving that can be directed towards advancing your organisation’s mission.
The Corporations Act permits registration of companies for a special purpose. This means rather than operating for generic profit-making activities, your company is established explicitly for charitable purposes. In a not‐for‐profit company, every dollar earned must be channelled exclusively into promoting your charitable goals.
Typically, this means that:
- All income generated is directed solely towards your charitable objectives;
- No dividends are paid to shareholders;
- Directors cannot be remunerated with fees for their services, although they may claim approved expense reimbursements;
- Any additional payments to directors must be jointly approved by all directors.
Is A Not‐For‐Profit Company Right For Me?
Deciding whether a not‐for‐profit company is right for you starts with honestly assessing your goals. Are you truly committed to operating exclusively for a charitable purpose, without the intention of distributing profits to shareholders?
Keep in mind that this structure restricts direct financial gain for members, meaning you cannot pay dividends or charge directors fees for advisory services. Directors, however, may be employed in other capacities and receive a salary under standard employment arrangements. If these limitations interfere with your organisational plans, a different legal structure may be more appropriate.
If your vision aligns with a purely charitable mission and you are comfortable with these operational boundaries, a not‐for‐profit company could be the ideal structure. For additional guidance on your options, our business structure guide offers further insights and considerations.
How Is A Not‐For‐Profit Company Different To A Company Limited by Guarantee?
A common structure for charitable organisations is the Public Company Limited by Guarantee (CLG). So, what sets a not‐for‐profit company apart?
The main difference is that a not‐for‐profit company is registered as a private entity, meaning its funding is sourced privately via shareholders. In contrast, a CLG is a public entity that can attract public funding-with its members’ liability limited by a nominal guarantee (often between $10 and $100). This distinction can affect your organisation’s funding options and regulatory reporting.
For many organisations aiming to operate as charities, a CLG is attractive because, upon successful registration with the ACNC, the onerous ASIC fees may be waived. However, if accessing private funding and benefiting from notably lower annual fees appeal to you, a not‐for‐profit company can be a compelling choice.
What Are The Benefits Of A Not‐For‐Profit Company?
You might wonder why anyone would choose to register as a not‐for‐profit company when a CLG is often the default for charities. Here are three key advantages in 2025:
1. Private Funding Flexibility: As a private company, you can raise funding from a targeted group of shareholders instead of relying solely on public contributions. This can be particularly advantageous if your organisation operates within a niche market. For more funding insights, explore our article on legal strategies for startups and small businesses.
2. Shareholder Control: While you cannot distribute dividends, structuring different classes of shares allows you to assign varying voting rights. For example, founding shareholders can retain decision-making control while other classes remain silent. This detail is typically set out in a tailored Shareholders Agreement.
3. Reduced Annual Fees: In 2025, if you qualify as a not‐for‐profit company, you benefit from significantly lower ASIC annual review fees – around $55 per annum compared to approximately $1,500 per annum for a CLG. These savings allow you to allocate more resources towards your charitable mission.
These benefits make the not‐for‐profit company structure an attractive option if you’re focused on both efficient operations and maximising funds for your charitable activities.
How Do I Set Up A Not‐For‐Profit Company?
If you decide that a special purpose not‐for‐profit company is right for your organisation, it’s essential to follow two key steps when setting it up:
- Draft a tailored Company Constitution that complies with the requirements unique to not‐for‐profit entities.
- Submit a Not‐For‐Profit Declaration to ASIC to affirm that your company’s income will be used exclusively for charitable purposes.
For Step 1, your Constitution must clearly state that:
- All income is directed solely to further your charitable purposes;
- No dividends or standard director fees are to be distributed;
- Any necessary reimbursements (such as travel expenses) require collective director approval;
After finalising these documents, you must complete a declaration confirming these stipulations. It is always wise to consult with an experienced lawyer – for example, our small business lawyer team can help ensure you meet all compliance requirements.
What’s Next?
Once your not‐for‐profit company is established, several routine administrative tasks follow. It’s advisable to speak with an accountant about setting up:
- A dedicated company bank account
- An appropriate tax file number
- PAYG withholding registration
- Essential insurance coverage
If you plan to pursue charity registration, you will also need to apply to the ACNC. Successful registration often provides benefits such as waived ASIC fees and eligibility for Deductible Gift Recipient (DGR) status-a significant advantage in today’s environment.
Keeping abreast of regulatory changes is vital. Be sure to review our updated regulatory compliance guides and legal tips for starting a business to ensure your setup remains current in 2025.
Speak To A Lawyer
If you need help understanding your options or would like assistance with setting up your structure correctly, we’re here to help!
Engaging with an experienced lawyer can guide you through the complexities of establishing your not‐for‐profit company and help ensure you meet all regulatory requirements. For personalised advice and support, feel free to contact our friendly team on 1800 730 617 or email team@sprintlaw.com.au for a free, no‐obligation consultation.
As you embark on your charitable journey in 2025, having the right legal framework is key to making a lasting impact. For additional insights on optimising your legal structure, take a look at our business structure guides and explore how our services can support your ongoing legal needs.
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