If you have been running a competition or training group for sport and are considering making it official, it’s important to consider what club structure best suits you. Obtaining a formal legal structure has many benefits including the ability to get insurance, rent out premises and affiliate with other sporting bodies. Regardless of whether you want to start a club, league, or federation, there are a few legal structures that you can choose. This article goes through the basics of each structure to help you determine what best suits your group.
Not-for-Profit Club Structure
This type of club structure does not generate profit for its members. Rather, these structures suit organisations that will put any profit back into running the organisation.
Company Limited by Guarantee (CLG)
CLGs are a typical structure for sporting bodies that operate on a national level. For example, national governing bodies of sports which have federated structures (i.e. a national governing body with state-level affiliates) use these structures. The reason for their commonality is because ASIC (Australian Securities and Investments Commission) regulates these bodies, which means that it can operate all across Australia.
A CLG is a separate legal entity. It can hold property in its name, and anyone may sue it. If you choose to set up a CLG, your organisation will need a constitution. You also have to register it with ASIC. The members will have to pay a nominal amount (around $20-$100) in writing, which becomes the property of the company. If you became a member of an existing CLG, the CLG probably incorporated the amount into your membership fee. If the CLG winds up, the liability of members is limited to the nominal amount that they have paid.
An incorporated association is a common structure for smaller sporting clubs that operate locally or within one state. The reason is that state law and state bodies like Consumer Affairs Victoria and NSW Fair Trading regulate them. An example of an incorporated association is VRI Fencing Club Inc, a sporting club that operates in Victoria.
You have to register incorporated associations with the state regulator. Hence, the process will be slightly different in each state. For example, if your incorporated association will be in NSW, you will need to put in an application form with NSW Fair Trading. The application needs to include:
- The details of at least five members;
- A copy of your proposed constitution; and
- A statement of your association’s objects.
Some sporting clubs and leagues aim to distribute profits to members. While being for-profit can limit your access to some government grants and funding, it is suitable for sporting organisations that would like to have future growth similar to a business.
Public companies are not a very common structure for sporting clubs and sporting leagues. However, they can suit large and wealthy professional sporting teams.
The most common publicly trading sports teams are founded overseas and include internationally renowned soccer clubs and some corporately owned American football and basketball teams. For example, Manchester United Football Club Ltd is a publicly trading company established overseas.
Part of the reason this is not a conventional structure in Australia or overseas is that sports governing body rules can limit a team or league’s ability to trade publicly. The cost of setting up as a public company and complying with ASIC regulation is also greater than other structures, so it may not be financially viable even if your group is large enough.
Proprietary Limited Company (Private Company)
Incorporating as a private company is a good alternative if you would like to operate your sporting club or league as a business. Sports leagues in Australia commonly use this structure. For example, the Victorian Dodgeball League Pty Ltd is an Australian private company.
The benefit of a private company structure is that the company will be a separate legal entity. It protects the assets of the shareholders. Another advantage is that this structure allows for growth by giving you the option to sell new shares in the business, as well as distribute profits to your shareholders.
When you set up a private company, you have to register with ASIC to obtain a certificate of registration and an Australian Company Number (ACN). You will also have to put together a company register which includes:
- A constitution;
- Share certificates; and
- Director and secretary consent forms
There are many different types of legal structures to choose from when formally incorporating a sports group. What club structure you choose will depend on whether you want to distribute profits, where you plan to operate and what financial resources you have. Are you looking to establish a formal club structure? Contact our business lawyers on 1300 544 755 for assistance or fill out the form on this page.