The advantages of incorporating a not-for-profit entity (providing you also seek DGR status) are:

You can offer private donors a tax deduction for gifts made
Grant funding applications are more straightforward – if you are not NFP then grants generally have to be auspiced
You may be able to take advantage of the GST-free status for the supply of goods and services supplied at less than commercial rates (see The 75% Rule)
Providing you also obtain Income Tax Exempt Charity (ITEC) status, net income is not taxable, allowing you to retain all of the surpluses for future activities.

The disadvantages are:

  • You cannot take any surpluses made as a dividend
  • If the entity is wound up, any remaining assets have to be given to another, similar, entity
  • The accounts have to be audited each year, and you have to have an Annual General Meeting (AGM)
  • Unless you set up a Company Limited by Guarantee, your level of control of the organization will be limited

Whether you structure your business as a not-for-profit organization or as a taxpaying entity will depend on your own situation, that of your potential colleagues, the nature of the activity, funding requirements, and future plans, among others. While a restructure to accommodate changed circumstances at a later date may be possible, it is much better to have the most appropriate structure in place in the first instance.