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By DanielLawson, work in progress. AddToMe !!! Introduction Turning a club or society into an IncorporatedSociety is a reasonably straightforward thing to do, however there are a lot of things that aren't obvious to start with. When the WaikatoLinuxUsersGroup decided to go down this path, it took a long time before everything was made obvious. Hopefully this resource will help other clubs of any nature painlessly work their way through the steps required. !! Why should our society Incorporate? The biggest single point of Incorporating a club or society is that it becomes a separate legal entity. It can conduct business, own property, and hold assets. These are all held separately from any one member of the society, so the club as a whole is protected from its members. Its members are also protected, as they are not held personally liable for any debts the society may owe. Quoting from the NZ Companies Office on the benefits of becoming an IncorporatedSociety: > There are four main advantages of being an IncorporatedSociety: > > * The society becomes a separate legal entity from its members. As a result, it can lease, rent, buy/sell property, borrow money and enter into contracts in its own name. The society also becomes capable of perpetual succession -- that is, its existence continues despite membership changes. > > * Members have no personal liability for the debts, contracts or other obligations of their society.There are two exceptions to this. The first is where debts or obligations are incurred from operations involving financial gain. In such circumstances, the members involved in the operations become personally liable for the debts and obligations. The second exception is where debts or obligations are incurred as the result of unlawful actions. Again the members involved become personally liable. > > * As the rules of the society must meet the minimum requirements laid down in the Act, there is some certainty as to the way the affairs of the society should be conducted. > > * Members can have no individual claim on the property of the society except where the rules state that surplus assets are to be distributed to members when the society is put into liquidation. Therefore property belongs to the society and no individual has personal interests or rights in the property. If you want to put across a more "professional" image, or intend to apply for fundraising for projects, or want to collect fees in a structured manner, then perhaps becoming an IncorporatedSociety is a good decision. !! Why shouldn't our society Incorporate? The biggest reason is time, in my opinion. It is a lot of hassle. Also, once you have a set of rules in place as to how the society must operate, you actually ''have'' to follow them. The benefit might actually be fairly minimal for your society. !!! Financial Requirements It's worth stressing that if your club or society becomes an IncorporatedSociety, then there are some fairly strict requirements about how finances are handled. !! Non profit organisation A non-profit organisation is any society, association or organisation: * not carried on for the profit or gain of any member, and * whose rules do not allow money, property, or any other benefits to be distributed to any of its members. You will have to make sure that the rules of your IncorporatedSociety state that (especially that in liquidation) that money/property are not to be distributed back to members, and you will need a rule that says that the previous rule can't be altered (perhaps without consulting the IRD). The society can employ people, and I believe can pay honorariums to its committee, however these have to be fair and current market rates. (Confirm this?) !! Tax exemptions There is a [$1000 tax rebate available to non profit organisations | http://www.ird.govt.nz/incometaxbusiness/payingtax/taxrates/non-profittax.html]. Subs, Fees, Grants, and Donations are not taxable as an Incorporated Society. You pay tax on interest earned, and there may be other forms of income which an IncorporatedSociety will pay tax on. If you have a bank account that does not give you interest (such as an ASB IncorporatedSociety business account) then you can apply to the IRD for an exception on resident withholding tax on interest, by way of a letter and providing financial statements to this effect. This will mean you don't have to file a tax return every year. Unless you are a charity, you probably won't get any other type of tax exemption. If you are a charity, read the IRD's [Charity Guide | http://www.ird.govt.nz/library/publications/geninfo/ir255.pdf]. (I assume) Becoming a charitable society is outside the scope of this HOWTO. !!! Steps to follow !! Preparation In preparation, you should definitely read the NZ Companies Office document on [Registering an Incorporated Society | http://www.med.govt.nz/ri/co_reg/incsociety1.html]. I'd also suggest you try and talk things over with the majority of your society -- perhaps over the course of a few meetings. Everyone needs to understand what is involved, and needs to understand that you are making the leap from a group of people who hang out occasionally, to a legal entity with rules and responsibilities. !! Write your charter The NZ Companies Office has a sample set of rules that you can use to form the basis of your charter. It's not complete however, and I'd recommend referring to the charters of other NZ based [IncorporatedSocieties | IncorporatedSociety], for example the WaikatoLinuxUsersGroup has their charter online at WlugCharter. See the note about Tax responsibilities below as well. !! Register In order to register you need fill in an 'Application to Incorporate a Society', and a 'Statutory Declaration of Rules'. Both can be found online at the NZ Companies Office, which unfortunately uses JavaScript so I cannot directly link to these forms. See the [relevant part of the NZ Companies Office online library | http://www.companies.govt.nz/pls/web/DBSLIBVS.Library_Validate_Search?p_access_no=6036a6538ab0b46d680843e7c94f70ec&p_application=LIB&p_frames=&p_doc_chkbox=dummy&p_current_level=1.38.6&p_folder_id=1706] at the time of writing. In order to complete the Application, you will need 15 members to sign and witness the form. The declaration of rules must be filled in with a Justice of the Peace. There are usually several of these in any town, so it shouldn't be a problem finding one. !! Financial / Tax responsibilities Just because you're an IncorporatedSociety doesn't make you exempt from income tax. The first thing you should be doing as an Incoporated Society (ie, as soon as you get your Certificate of Incorporation back from the Companies Office) is obtaining an IRD number, opening bank accounts, and possibly applying to the IRD for tax exempt status. One thing to be aware of here is that the IRD has certain requirements that must be met by your rules before you can qualify for any tax exemptions. It is probably worth submitting your proposed rules or charter to the IRD for verification ''before'' you register with the Companies Office. This is merely a time-saving device however -- if the IRD wants you to make changes to the charter, you have to have a special meeting to make the changes, get them verified by a JP, and register them with the Companies Office again. Note: A JP does not actually verify your changes, just your signatures. That is, they verify that you are who you say you are, and that you are requesting these changes. If you are not tax-exempt, you will have to fill in a tax return (a nil return if you make no income) every year. ---- See Also: * community.net.nz HOWTO on [Incorporated Societies in NZ|http://www.community.net.nz/How-ToGuides/LegalStructures/PublicationsResources/incorpsoc.htm] ---- CategoryAdministration, CategoryHowto
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