January 16, 2020

Restrictions on the size of an Australian partnership or association

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Restrictions on the size of Australian partnerships and associations

28 January 2021

There’s a limit on the size of partnerships and associations.

And, if you don’t comply its a strict liability offence so here’s what you need to know.

Section 115 of the Corporations Act covers those restrictions and we'll explore that section next.

115 Restrictions on size of partnerships and associations

(1)  [Size of non-incorporated body] A person must not participate in the formation of a partnership or association that: 

has as an object gain for itself or for any of its members; and

has more than 20 members;

unless the partnership or association is incorporated or formed under an Australian law.

Note: For the effect of a contravention of this section, see section 103.

(2)  [Different size under regulations] The regulations may specify a higher number that is higher than the number specified in paragraph (1)(b) for the purposes of the application of that paragraph to a particular kind of partnership or association.

(3)  [Strict liability in s 115(1) offence] An offence based on subsection (1) is an offence of strict liability.

Note: For strict liability, see section 6.1 of the Criminal Code.

The numbers in the regulations vary to those in the Corporations Act. 

So exactly what do the regulations allow?

Corporations Regulations: reg 2A.1.01(1) reproduced below prescribes size of various partnerships or associations for the purposes of s 115(1)(b).]

You'll note the most generous allocation goes to the accountants followed by lawyers. 

CORPORATIONS REGULATIONS 2001 - REG 2A.1.01 Size of partnerships or associations

Size of partnerships or associations

             (1)  For paragraph 115(1)(b) of the Act, the number prescribed for a kind of partnership or association is the number specified in the following table for that kind of partnership or association: 

Item

Kind of partnership or association

Number

1

(a) Actuaries, medical practitioners, patent attorneys, sharebrokers, stockbrokers or trademark attorneys

(b) Partnerships or associations of the kind specified in subregulation (2)

50

2

Architects, pharmaceutical chemists or veterinary surgeons

100

3

Legal practitioners

400

4

Accountants

1 000

(2)  For paragraph (b) of item 1 of the table in subregulation (1), the partnership or association is one that:

(a)  has as its primary purpose collaborative scientific research; and

(b)  includes as members:

    (i)  at least 1 university; and

    (ii)  at least 1 private sector participant;

whether or not it also includes government agencies or publicly funded research bodies.

(3)  In sub-regulation (2):

"private sector participant " means an entity that obtains the majority of its revenue from sources other than Commonwealth, State or Territory appropriations.

You'll likely consider many factors before deciding on a partnership structure. Here's an article about business structures in Australia

Do you have questions or comments about the size of partnerships or associations? Be sure to leave them below. 





About the author 

Vivian Michael

As founder and lawyer at Michael Law Group, CPA and owner of a business consultancy, Vivian is well-positioned to advise Australia's top entrepreneurs. Entrepreneurs benefit from Vivian's commercially focussed legal advice, business experience, and commitment to deliver the best quality business legal services to entrepreneurs.

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