Key questions to ask

To help your group work out what its needs are and what type of legal structure would best suit it, consider the following questions (and consult the following table):

How large will your group’s membership be?

The size of your group may be relevant to the type of structure you should choose. For example:

• an incorporated society must have at least 15 named members
• a trust need have only one appointed or elected trustee, although usually there are at least two (the same applies to a charitable trust board based on a trust)
• a company need have only one shareholder and one director (this can be the same person)
• to incorporate as a charitable trust board, a charitable society or group must have at least five members
• industrial and provident societies must have at least seven members.

How flexible should the membership rules be?

An incorporated society must have rules about how people join or leave the society. These rules can be written to meet the organisation’s needs. If your group intends to begin with a limited number of people involved, but plans to become larger, an incorporated society is likely to be the best option in the long term. Charitable societies that have nominated several of their members to be trustees are not greatly affected by turnover in membership because the trustees continue to run the organisation. However, it may not be easy to change trustees. The trust deed for any charitable trust or charitable trust board can set up whatever rules a group wants for appointing trustees, but these must be specific.

Who is your group accountable to?

If your group is accountable to a wide number of people, it may be better to have a broad membership-based legal structure, such as an incorporated society. Trusts and charitable trust boards that are based on a trust aren’t accountable to a membership in the same way as the managing group of an incorporated society.

Who makes important decisions?

If the group of decision-makers in your organisation is small, it may be best to set up a trust, charitable trust board or company. If larger numbers of people are included in decision-making, an incorporated society may be suitable.

How much money or property will your group have?

If your group has or may potentially have substantial money or property, a trust may be an appropriate way to manage and use it, particularly if you want to keep decision-making within a small number of people.

How will your group be funded?

Consider where the funds will come from to establish and maintain your organisation.

Will you have employees?

If it’s going to be employing paid staff, your organisation should be incorporated so that it has its own legal identity with power to, among other things, enter into employment contracts in its own name.

Will your group make a profit?

If your group is a commercial venture, then consider a profit-based structure such as an industrial and provident society, a partnership, or a company. Trusts and incorporated societies can make profits, but if they have charitable status or are not-for-profit then the profits cannot go to members.

Is Māori-owned land involved?

If it is, you may need to consider establishing a trust under Te Ture Whenua Act 1993 / the Māori Land Act 1993.