To be eligible for incorporation the association must be not-for-profit. 'Not-for-profit' refers to the membership, purpose and activity of the association. This does not mean that an association cannot make a profit from its operations.
It is acceptable for an association to trade with the public so long as the profits from those transactions are used to promote the objects and purposes of the association and members do not profit from the activities.
This is different to a ‘for-profit’ company where profits can be lawfully distributed to the members (ie shareholders) in the form of cash dividends.
An association that operates outside of these conditions is no longer eligible to remain incorporated under the Act, and may be required to change its incorporation to a different type such as a co-operative or company.
However a not-for-profit organisation is permitted to:
- employ people (including members) and pay them wages or salary;
- allow members to derive a monetary benefit from the association in circumstances where the member would be equally entitled to the benefit if he or she was not a member (eg members of housing associations being housed);
- protect or regulate a trade, business or industry that members are involved in, as long as the association itself does not participate in the trade, business or industry (eg professional associations);
- commercially trade with the public;
- charge admission fees to events organised for the promotion of the association's objectives;
- arrange competitions between members for prizes and trophies;
- provide facilities or services for members (eg a bowling club running a bar); or
- remunerate a member in good faith for services provided to their association.