3 Benefits of Running an Incorporated Society in NZ

There are many successful incorporated societies in New Zealand, covering different aims and shared interests from sports to religion and culture. Organising as an incorporated society lets a group formalise its processes, develop a distinct identity, and help ensure long-term sustainability. There are different benefits from an incorporated society structure depending on the circumstances of the group.

This article will set out three benefits of running an incorporated society in New Zealand, including:

• having a distinct legal identity; 
• qualifying for tax exemptions; and 
• building credibility and trust. 

A Distinct Legal Identity

A key advantage of organising your group as an incorporated society is having a distinct legal identity. Similar to a company, an incorporated society is its own legal person outside the people who constitute the group. That means that an incorporated society can lease and buy property, sign contracts on its own accord, and even borrow money if necessary. It also means that the society’s property, including any money or buildings, can be held by the society itself. This has a range of benefits. One benefit is that no individual member of the incorporated society has control of the society’s property. This benefit helps safeguard the governance of the property. It also means that members of the society cannot be held personally liable for the society’s liabilities or debts.

However, there is a critical exception to the liability of incorporated societies. This exception is when members of the society conduct unlawful activities or if the society conducts activities for profit that personally benefits certain members. In the latter case, the law can hold members liable. 

Qualifying for Tax Exemptions

Another advantage of an incorporated society is that it can often qualify for a tax exemption. An incorporated society can also register as a charity. However, this is dependent on whether its activities and goals align with the requirements of a charity. Therefore, it is best to get expert advice if you are interested in the tax advantages of operating as an incorporated society. 

Many groups formalise as incorporated societies to pursue efficiencies regarding governance and managing their tax obligations. Whether or not your incorporated society will benefit will partly depend on:

• the nature of your society; 
• its aims and goals; and 
• the kind of income streams it has. 

It is best to engage a specialist tax lawyer who can advise on these issues. You can also contact Inland Revenue directly for advice if you have questions. If this is a significant issue for your group, seeking advice before formalising the incorporation of your society is a smart move.

Building Credibility and Trust

Whether or not your incorporated society also registers as a charity, having a more formalised structure for your group will help build its credibility and trust in the wider community. In addition, the fact that the society has its own legal personality, typically with its own property and interests, separates the group from its founding members or the current leadership. Consequently, the group can more easily sustain itself into the future. 

Having an incorporated society also signals a degree of seriousness and formality regarding the group’s aims. It makes it easier to seek external assistance, support and even donations. It may also have the effect of improving governance of the society internally. This is because the society will have the ability to do things in its own name rather than rely as heavily on separate members. For instance, a particular member may have the society’s premises in their name. Likewise, this may raise more fears for the group’s sustainability than a society that owns the premises under its name.

Key Takeaways

There are a variety of benefits to running an incorporated society in New Zealand. For instance, incorporated societies have their own legal personality. Hence, they can hold property and other interests under their name. This safeguards members from legal liability to a significant extent and improves society’s sustainability and governance. There are also potential advantages like tax efficiencies and building your organisation’s credibility and community trust.

For more information about how to structure a business in New Zealand, contact LegalVision’s business lawyers on 0800 005 570 or complete the form on this page.

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