A charity is an organisation whose primary objective is to benefit the public. All the money raised must go towards achieving the charities aims. But how do you set up a charity to begin with?
This brief guide explains the 6 main steps to get started.
- Find Trustees for your charity
To begin with, you will need to recruit and appoint trustees. The trustees can strongly influence how effective the charity is in the future. An effective trustee board can lead to a well-governed and successful charity.
Trustees must be committed to their tasks and have the skills, knowledge, and experience that the charity needs. When a trustee is appointed, they should receive copies of all the key documents relating to the charity’s work and their duties as a trustee. You will usually need at least 3 trustees.
- Make sure the charity has a ‘charitable purpose for the public benefit’
All charities must have charitable purposes that help the public. This is known as being for the public benefit. Charitable purposes can include things contributing to:
- Education
- Religion
- Health
- Saving lives
- Relieving poverty
- Human rights
- Protection of the Environment
- The arts
- Amateur sport
- Animal welfare
- Citizenship or community development
- Racial harmony
- The efficiency of the police, fire or ambulance services, or the armed forces.
- Choose a name
The next step is to name your new charity. There are a few things you need to keep in mind when choosing a name as it must not:
- Be similar to an existing charity
- Use words you do not have permission to use such as a trademark
- Be offensive
- Be misleading
You can check the names of registered charities here: https://www.gov.uk/find-charity-information
- Choose a structure for your charity
After choosing a name, you need to choose a structure for your charity. The structure will affect who runs the charity, how it is run and what the charity can do.
Some charity structures are corporate bodies which means the charity is seen by law the same way as an individual is. This means you can do things in the charity’s name such as pay staff and own freehold or leasehold land or property. It also means that its trustees are generally not liable for what it does.
If a charity is not a corporate body then the trustees are personally liable for what it does and two or more trustees, a corporate custodian trustee or the charities’ land holding service will have to ‘hold’ any land on the charity’s behalf.
There are 4 main types of charity structures:
Charitable company
A charitable company will be limited by guarantees rather than by shares when you register. Trustees will have limited or no liability for a charitable company’s debts or liabilities.
Charitable Incorporated Organisation (CIO)
This is an incorporated structure designed for charities. You can create a CIO by registering with the Charity Commission. You do not need to register with Companies House. Trustees have limited or no liability for CIO debts or liabilities.
Charitable Trust
This structure allows a group of people (trustees) to manage assets such as money, land, buildings, or investments.
Unincorporated charitable association
This structure is a simple way for a group of volunteers to run a charity for a common purpose. Unincorporated charitable associations cannot employ staff or own premises.
Our highly regarded and friendly Charity Law team can advise you on the most appropriate structure for your charity.
- Create a governing document
After choosing a structure for your charity, you must create a governing document. This will explain how your charity is run and lets trustees and interested parties know:
- What your charity’s purpose is
- Who runs it and how it is run
- How trustees are appointed
- Rules about trustees expenses
- Rules about payments to trustees
- How to close the charity
The type of governing document you will need will depend on the charities structure.
Our Charity Law team can guide you through the process of writing your governing document.
- Registering as a charity
You must register your charity if its income is above £5,000 per year or it is a Charitable Incorporated Organisation.
When you apply you will need to provide information about your charity’s charitable purposes, how you run your charity for the public benefit, and proof that the charity’s annual income is over £5,000, or that you are a CIO.
You can also register your charity’s details with HMRC to get tax back on things such as Gift Aid donations.
If you would like to discuss any points in this article further or are looking for legal advice relating to setting up a charity, please contact Spire Solicitors LLP on 01603 677077.
