If you decide to set up a charity there are a number of things to consider and steps you need to take. To help you get started we have listed some important factors to consider when you start your charity.
Decide Your Charity’s Purposes
It is important that your charity’s purposes (also known as “objects”) are exclusively charitable, otherwise it cannot be a charity. Your charity’s purposes tell people what the charity does, where it does it and who will benefit (its beneficiaries). Clearly stating these things shows how your charity will meet the public benefit test. It also helps the Charity Commission and HM Revenue & Customs decide if it is a charity.
Choose a Structure
There are basically two forms a charity can take: incorporated or unincorporated. An incorporated charity is a legal form that gives the charity its own legal personality. This means it can own property and enter into contracts in its own name. Incorporation gives trustees greater protection from personal liability. An unincorporated charity doesn’t have a legal personality and can’t hold property or enter into contracts. Trustees’ personal liability is unlimited.
Unincorporated – either a Charitable Association or a Charitable Trust
There are advantages and disadvantages to each but getting it right for your charity from the start avoids the need for costly changes in the future.
Write a Governing Document
Once you have decided on your charity’s structure you will need to write a governing document. This is a legal document that sets out how the charity will be run and who runs it. The type of governing document and what goes in it will depend on your charity’s structure.
|Charity Structure||Type of Governing Document|
|Charitable Incorporated Organisation||CIO Constitution|
|Charitable Company||Memorandum and Articles of Association|
|Charitable Trust||Trust Deed|
Choose a Name
|Type of Governing Document||How is the Charity Started?|
|CIO Constitution||Register with the Charity Commission|
|Articles of Association||Certificate of Incorporation from Companies House|
|Constitution||Agreed by membership & signed by trustees|
|Trust Deed||Signed by trustees & an independent witness|
Once you have set up your charity you will need to think about how you are going to run it. Even a small charity will need a bank account in the name of the charity. You might also find it helpful to have a business plan from the start. This will help you to focus on what your charity does and how it will achieve its objectives.
Depending on what your charity does, you might need a range of policies. The Charity Commission for England and Wales expects all charities to have a reserves policy, so you should set a reserves policy before or soon after starting your charity. As a minimum, we recommend that you also put in place a conflicts of interest policy from the outset.
If you want to set up your charity as a Charitable Incorporated Organisation or if your charity’s income is going to be over £5,000 per year, and it is based in England or Wales, you will have to register it with the Charity Commission for England and Wales. The Commission will only register your charity if it is exclusively charitable and can demonstrate that it meets the public benefit test.
If your charity will operate in Scotland or Northern Ireland, you may also need to register with the Office of the Scottish Charity Regulator and/or the Northern Ireland Charity Commission.
You can also register your charity with HM Revenue and Customs. This allows you to get tax relief on things like Gift Aid donations.