How to Use This Framework
Legal Structures and Sources of Capital
This framework is designed to help organisations and investors understand how legal structure shapes access to capital.
In Australia, there is no single legal form specifically designed for social enterprises. Instead, purpose-driven organisations operate across a spectrum of legal structures, each with different implications for:
- The types of capital they can raise
- Whether returns can be distributed
- Governance and control
- Tax obligations and concessions
- DGR eligibility
- Regulatory and reporting obligations
This framework brings together two critical dimensions of impact investment:
Equity, debt, philanthropic funding (including DGR), and member or shareholder capital.
Not-for-profit or for-profit structures, each with distinct constraints on capital access and distribution.
By mapping these together, the framework helps clarify:
- Which funding sources are available to different entity types
- Where structural constraints limit capital options
- Why a combination of structures is often used to blend mission and investment
- How legal design influences long-term alignment between purpose and capital
Importantly, this is not a ranking of structures. There is no "best" legal form. The right structure depends on:
- The organisation's mission
- The type and amount of capital required
- The desired level of investor involvement
- Whether philanthropic/DGR support is essential
- Governance preferences
- The trade-off between structure type and regulatory and compliance obligations
- Geographical operation
Equity is capital provided in exchange for an ownership interest that carries a right to share in profits or surplus and, usually, in the organisation's value on sale or wind-up. In a company this is shares; in a unit trust it is units. ✔ means the structure can issue an ownership interest to outside investors. ✘ means it cannot, either because there are no ownership interests to issue (most not-for-profits) or because the interests cannot be transferred to investors. ~ means equity-like investment is possible but constrained or technical, such as Mutual Capital Instruments or co-operative member shares.
Deductible Gift Recipient (DGR) status lets donors claim a tax deduction for gifts to the organisation. This column shows whether a structure can be eligible to apply, not that it automatically holds the status. The Australian Taxation Office only grants DGR endorsement where the entity falls within a specific DGR category set out in the Income Tax Assessment Act 1997, generally is a registered charity (required since 14 December 2021, with limited exceptions for ancillary funds and entities listed by name in tax law), meets the 'in Australia' and governance requirements, and has applied for and been granted endorsement. Read ✔ as 'can be eligible if the category and other criteria are met', not 'holds DGR'.
| Legal Structure | Type of Capital Available | Key Structural Constraint | Regulation | |||
|---|---|---|---|---|---|---|
| Equity | Debt | Philanthropy / DGR Eligible | Member Capital | |||
| Not for Profit | ||||||
| Public Company Limited by Guarantee (CLG) | ✘ | ✔ | ✔ | ✘ | No share capital or shareholders. Cannot pay dividends or offer equity capital. Can trade and make surplus but must reinvest profits. | Nationally applicable law and regulation. Regulated by ASICAustralian Securities and Investments Commission or, if a registered charity, by ACNCAustralian Charities and Not-for-profits Commission. |
| Incorporated Association | ✘ | ✔ | ✔ | ✘ | Intended for community non-profit activities. Not suitable for running a large commercial business or raising investment. No equity pathway. | State-based law and regulation (e.g. Fair Trading in NSW). Regulated by ACNCAustralian Charities and Not-for-profits Commission if a registered charity. |
| Cooperative (Non-distributing) | ✘ | ✔ | ✔ | ~ Limited – may issue member shares and Co-op Capital Units (CCUs) | Cannot distribute surplus to members. One member, one vote. Surplus must stay within the organisation. | State-based law and regulation (e.g. Fair Trading in NSW). Regulated by ACNCAustralian Charities and Not-for-profits Commission if registered as a charity. |
| Charitable Trust | ✘ | ✔ | ✔ | ✘ | Controlled by trustees rather than members or shareholders. Cannot offer ownership stakes to investors or raise equity. Can borrow money and raise funds through donations or grants. | Established by trust deed. State-based law. Tax considerations apply. Regulated by ACNCAustralian Charities and Not-for-profits Commission if a registered charity. |
| Can be Not for Profit or For Profit | ||||||
| Mutual | ~ Available if Mutual Capital Instrument (MCI) rules apply | ✔ | ~ Philanthropic giving available; DGR eligibility depends on type | ~ Depends on type | One member, one vote. If registered as a charity, cannot issue Mutual Capital Investments (MCIs). | Depends on structure: Corporations Law, State incorporated association law, or general trust law. |
| Indigenous Corporation | ✔ | ✔ | ✘ | ✔ | Several structures possible. Limited to indigenous business owners. | Regulated by ORICOffice of the Registrar of Indigenous Corporations if registered under the CATSICorporations (Aboriginal and Torres Strait Islander) Act Act. Could also be regulated by ASICAustralian Securities and Investments Commission, states, or ACNCAustralian Charities and Not-for-profits Commission. |
| For Profit | ||||||
| Private Company (Pty Ltd) | ✔ | ✔ | ✘ | ✔ | Simplest company structure owned by shareholders. Can distribute profits. Restrictions apply to raising equity. Suitable where scalable profit supports equity returns. | Nationally applicable law and regulation. Regulated by ASICAustralian Securities and Investments Commission (or ACNCAustralian Charities and Not-for-profits Commission if a registered charity).* |
| Public Company (Listed or Unlisted) | ✔ | ✔ | ✘ | ✔ | Must prepare annual financial reports and, in many cases, have them audited. Higher compliance and transparency requirements than pty ltd co. Designed for larger capital raises. | Nationally applicable law. Regulated by ASICAustralian Securities and Investments Commission (or ACNCAustralian Charities and Not-for-profits Commission if a registered charity).* |
| Cooperative (Distributing) | ~ Must issue member shares; may also issue Co-op Capital Units (CCUs) | ✔ | ✘ | ✔ | Dividends allowed but capped. One member, one vote. No strict rule requiring surplus assets to go to another not-for-profit on winding up. | State-based law and regulation (e.g. Fair Trading in NSW). Regulated by ACNCAustralian Charities and Not-for-profits Commission if registered as a charity. |
| Unit Trust | ~ Akin to equity but technically units | ✔ | ✘ | ✘ | Units are the investable interest in a unit trust and can be issued to investors. Units can be bought and sold similarly to shares, giving investors a proportionate beneficial interest in trust assets and income. Where units are offered to more than 20 investors or the public, the trust may constitute a managed investment scheme regulated by ASICAustralian Securities and Investments Commission under the Corporations Act 2001, triggering registration and compliance obligations. | Nationally applicable law. Complex tax considerations. May be regulated by ASICAustralian Securities and Investments Commission as a managed investment scheme. |
| Discretionary Trust – Family Trust | ✘ | ✔ | ✘ | ✘ | Income distributed at trustee's discretion to a defined family group. No fixed or transferable beneficial interest, so cannot take in outside equity investment. Typically used on the investor side as a wealth and asset-protection vehicle. | Established by trust deed. General (state-based) trust law. Tax treatment under the Income Tax Assessment Acts; the trustee is often a Pty Ltd regulated by ASICAustralian Securities and Investments Commission. |
| Discretionary Trust – Non-family Trust | ✘ | ✔ | ✘ | ✘ | Same structure as a family trust but the beneficiary class is not confined to a family group. No fixed or transferable beneficial interest, so cannot raise equity or member capital. Capital access is effectively identical to a family trust. | Established by trust deed. General (state-based) trust law. Tax treatment under the Income Tax Assessment Acts; the trustee is often a Pty Ltd regulated by ASICAustralian Securities and Investments Commission. |
| General Partnership | ~ Provided by partners only | ✔ | ✘ | ✘ | General partner is personally responsible for the partnership's debts. Equity limited to the resources of the partners. | State-based law. Not registered with Fair Trading. |
| Limited Partnership | ✔ | ✔ | ✘ | ~ Depends on type | Can be incorporated or not. Incorporated limited partnerships are common for venture capital. | State and federal law and regulation. Registered with Fair Trading in NSW. |
Aboriginal Community-Controlled Organisations (ACCOs)
An ACCO is not a separate legal structure. It is a model of governance and control that sits on top of one of the structures above. Under the National Agreement on Closing the Gap, an ACCO is incorporated and not-for-profit, controlled and operated by Aboriginal and/or Torres Strait Islander people, connected to the communities it serves, and governed by a majority Aboriginal and/or Torres Strait Islander board.
Because an ACCO takes its legal form from an underlying structure, the capital it can access and the regulator it answers to depend on that structure. Identify the underlying structure to see what applies in the table above.
Who provides each type of capital?
The table above shows which capital types each structure can access. Use this section to understand who the providers are and match your legal form to the right funding sources.
Early-stage capital
Government & philanthropic grants
- Provide funding to support public benefit or policy objectives.
- Typically do not require repayment, but may require strict compliance and reporting.
- Philanthropic grants may require specific eligibility criteria (e.g. Deductible Gift Recipient (DGR) status).
Family, friends & early believers
- Invest based on personal relationships and trust in the founders' vision.
- Often provide early-stage capital when other sources are unavailable.
- May have less formal processes but still require clear documentation.
- Can invest via debt or equity, depending on circumstances.
Angel investors
- Typically invest at early stages with high risk tolerance.
- Often motivated by belief in the founders and their vision.
- May offer more flexible terms and usually invest smaller amounts.
- Invest at an earlier stage than venture capital investors.
Crowd-sourced equity investors
- Large number of smaller investors contributing through online platforms.
- Expect clear communication and an accessible investment proposition.
- Typically subject to regulatory limits on investment amounts.
- Can help build community engagement and loyal customers alongside funding.
In Australia, Start Some Good is a crowdfunding platform designed specifically for social enterprises and impact-focused projects, connecting organisations with values-aligned supporters.
Growth-stage capital
Venture capital investors
- Invest in portfolios of high-risk companies, expecting a few big winners to offset losses.
- Target high-growth opportunities with strong financial return potential and large addressable markets.
- Typically require significant equity and influence over decision-making.
- May provide strategic, technical or managerial expertise.
Venture capital investors range from angel investing syndicates, high net wealth investors and family offices to dedicated venture capital funds. In Australia, venture capital fund managers with impact investment mandates include Giant Leap, Kilara, Virescent Ventures, Tenacious Ventures and Ecotone Partners. The websites of venture capital funds often contain useful resources and guidance for enterprises seeking investment funding.
Impact investors
- Aim to achieve measurable social or environmental impact alongside financial returns.
- Expect impact to be clearly defined and preferably measurable.
- Financial return expectations can vary from concessional to market-rate.
- Often take a long-term perspective aligned with impact outcomes.
In Australia, many impact investors are private ancillary funds (often referred to as "PAFs"), public ancillary funds ("PuAFs"), family offices and high net wealth investors. The Foundations Group for Impact Investment holds market information days and meet and greet sessions to connect for-purpose organisations seeking funding with these impact investors.
Debt providers (banks & specialist lenders)
- Typically only lend to enterprises with positive net cash flows.
- Focus on ability to repay loans and strength of cash flow.
- Will prefer to take security over hard assets or ask for guarantees.
- Some specialist lenders also consider social impact in their decision-making.