The Costs vs Benefits of Registering Your Groundup
Updated: Nov 17, 2020
You’ve gotten your groundup up and running. Your activities are becoming more regular, people are coming, and you’re ready to do more. But there’s that nagging question at the back of your mind – do I need to officially register my organisation? As with many questions in your groundup journey, there’s no right or wrong answer for this, and it really comes down to what you’re looking to achieve.
But before we go there, let’s caveat what “registering” means here. There currently isn’t an avenue where you can lodge notice of your groundup’s existence and activities, so when we say registering, we’re typically referring to registering your groundup as a legal entity with ACRA or the Registry of Societies.
What are your motivations for wanting to register?
Ask yourself what the reasons are for wanting to register your groundup. Common motivations groundup founders have cited for registering as an entity include access to fundraising options (beyond crowdfunding and grants for groundups), increased credibility and reducing their personal liability. These are all good reasons to register your budding groundup as an official entity.
1. Access to new fundraising options.
Registering will give you the option of selling goods or services on a regular basis to sustain your groundup operations. As a registered entity, you can now also apply for a corporate bank account, which may open up channels to grants that only disburse funds to corporate accounts.
2. One step closer to tax deductible donations.
Registering could also set you on the route towards becoming a charity and subsequently an Institution of a Public Character (IPC), where you can dangle the carrot of tax deductions in return for donations. Do note that registering alone isn’t sufficient to get you there, as there are still further steps of applying to be a charity and subsequently applying to be an IPC – a journey that could take 3 years or more.
Registering might also help your groundup gain traction, as registered entities are often seen as more credible and reduces the barriers of working together with partners and larger organisations. We have seen this happen most often when groundups are looking to work with primary and secondary schools.
4. Reduce personal liability.
If you have activities with higher risk of legal drawbacks, registering could help mitigate that personal risk. This thought does not usually dawn on groundup founders till they’ve had a near-miss or a legal issue to deal with, so do occasionally review your activities and processes for any potential risks and determine whether registering can help lessen those risks.
With all the benefits of registering, why would groundups choose not to register then? Of course, there are some considerations too, and this is where we go into the cold, hard costs of it. The exact costs involved will vary depending on which type of entity you choose to register, so in this article we will provide just ballpark figures to help you get across the first hurdle of whether to register or not.
1. Set up costs.
2. Compliance costs.
There may also be annual fees and other administrative responsibilities such as holding an Annual General Meeting, filing annual financial returns, finding people to sit on the Board of Directors and compliance with the Societies Act or Companies Act. Some groundups who registered as a Company Limited by Guarantee (CLG) have reported that the annual cost of running a CLG comes up to at least $3,000, including audit and company secretary fees. Bookkeeping services, if you don’t have a numbers person in your team, could set you back by another $600 or so annually. Compliance fees vary widely for the different entities, but to be on the safe side, weigh whether you can set aside at least $4,000 per year for this.
3. Opportunity costs.
Doing all these administrative duties will take up a significant portion of your time. A common gripe groundup founders have had with registering is that it takes away time from what truly matters – helping the beneficiaries. Figure out how much bandwidth you and your team have in terms of time, and see whether you have the ability to set aside on average 8-10 manhours a month to deal with such matters.
4. Corporate bank account costs.
Registering your groundup doesn’t necessarily mean that you need to have a corporate banking account, but sometimes grant administrators or corporates are only willing to transact with a corporate bank account for accountability reasons. Thankfully, banks are starting to apply the concept of customer-centric design to their products and quickly realising that minimum account balances have been a huge bugbear to budding entities, so the good news is that there now exist corporate bank accounts with no minimum balance required. There still are annual fees and certain transaction fees involved, but expect to spend less than $100 per year on these fees.
Is it possible to stay unregistered?
It is compulsory under the Societies Act for you to have a legal structure if your organising team has 10 or more persons, but if you have fewer team members than that, then not registering is an option as well. You will still need to comply with things like the employment law, tax law and various other laws regardless of whether a legal structure is adopted, but not registering could possibly free you up from a number of administrative duties and the time could instead be spent on doing more good.
We have seen groundups who have gone more than a decade without registering, and it hasn’t stopped them from doing good work all this while. If you’re new and just starting on your groundup journey, it may be prudent to stay unregistered first while you stabilise your activities so that you don’t commit to a whole load of administrative duties at a time where your attention is required elsewhere. After running your groundup for a while, you will have a better sensing of whether registering will lead to more benefits than costs, or if maintaining the status quo is something that works for you.
Registering your groundup can be said to be one of the major milestones in your very exciting self-starting journey, and it is a decision that takes a good amount of pondering over. Take your time to think about what you would like to achieve with your groundup and your motivations for registering.
Want to find out more in greater detail? Check out LegaleSE, a legal handbook for community organisations published by the Law Society of Singapore.