Starting a charity or for-purpose organisation is an exciting step, but choosing the right legal structure is key if you want to create impact in Aotearoa. The option you select will shape how your organisation operates. Each structure comes with its own advantages and limitations, so it is worth taking the time to understand what fits best with your goals, values, and long-term vision. Below, we explore the three main options available in Aotearoa New Zealand, and what each one could mean for your organisation.
1) Charitable Trust
Charitable trusts are the most common structure for purpose-led organisations in Aotearoa. They are well understood by funders, regulators, and the public, and are designed specifically for charitable purposes.
One of their biggest advantages is perception. Trusts are widely seen as mission-driven and focused on public benefit, which can make it easier to attract donors and partners. They also offer long-term stability, as trustees can provide continuity over time, as well as flexibility.
However, trusts cannot have shareholders or investors, which can limit access to capital. They also come with ongoing compliance obligations through Charities Services, which can add administrative work.
2) Charitable Company
A charitable company is essentially a company operating for a charitable purpose. Companies are one of the most familiar legal structures in Aotearoa, with clear governance rules under the Companies Act. This makes them attractive for organisations wanting strong structure, scalability, and flexibility.
They can also raise capital through shareholders or investors, which can be useful for growth or social enterprise models.
That said, the word “company” can create perception challenges. Many people associate companies with profit maximisation, which may make it tougher to attract donors. Additionally, companies may face higher compliance costs and do not automatically fit within the charitable framework unless they clearly advance a charitable purpose. Therefore, extra caution must be placed to ensure the company aligns with its charitable purposes.
3) Incorporated Society
An incorporated society is a membership-based structure, making it ideal for community-led initiatives. Members have voting rights and can directly influence the organisation’s direction, creating strong engagement and accountability.
This democratic approach can be a strength, but it also comes with trade-offs. Decision-making can be slower, and governance can become complex or even political as membership grows. In some cases, internal dynamics can become challenging to manage.
Similarities and Differences: Charitable Company vs Charitable Trust vs Incorporated Society
| Feature | Charitable Company | Charitable Trust | Incorporated Society |
| Primary Legislation | Companies Act 1993 | Charitable Trusts Act 1957 and Trusts Act 2019 | Incorporated Societies Act 2022 |
| Governing Document | Constitution | Trust Deed | Constitution |
| Key Decision Makers | Directors (and Shareholders for major decisions) | Trustees | Committee Members / Officers (minimum of 3) |
| Ownership / Members | Owned by Shareholders (who hold voting rights but cannot receive profits). | No shareholders or members. Governed solely by the trustees. | Member-based (minimum of 10 consenting members). Democratically controlled. With a democratic control, comes a risk of political division and takeovers. |
| Legal Identity | Separate legal entity. Can enter contracts and hold property in its own name. | Separate legal entity (once incorporated as a Board). | Separate legal entity distinct from its members. |
| Financial Distribution | Strictly prohibited from distributing dividends or profit to shareholders. | Strictly prohibited from distributing profits to trustees. | Strictly prohibited from distributing financial gain or property to its members. |
| Liability Protection | Limited liability for shareholders and directors (subject to directors breaching their duties under the Companies Act 1993). | Limited liability for trustees once incorporated as a Board (subject to trustees breaching their duties under the Trusts Act 2019) | Limited liability for members and officers (subject to officers breaching duties under the Incorporated Societies Act 2022). |
| Public Perception | May be viewed by the public as more “commercial” or business-like, which may impact donations. | Widely perceived by donors and funders as purely “mission-driven”. | Perceived broadly as a community, club, or member-focused organisation (e.g., sports clubs, cultural groups). |
| Charity Registration | Must register separately with Charities Services to get income tax exemptions. | Must register separately with Charities Services to get income tax exemptions. | Must register separately with Charities Services to get income tax exemptions. |
So, which is right for you?
If your focus is long-term charitable impact and public trust, a charitable trust is often the best fit. If you need flexibility, scalability, or investment, a charitable company may be worth considering. If your organisation is driven by community participation, an incorporated society could be the right choice.
If you would like to discuss which structure is right for your entity, feel free to reach out and contact us. We also provide many resources in the form of articles, guides, videos, webinars and more.
