14 August 2015
How to Set Up a Charity
Many people want to give back something to their community, or raise money for medical research for example, but how do you go about actually setting up your own charity, rather than just donating to one that’s already established?
To start with there are six steps to setting up a charity in England:
- Choose your Trustees – usually at least three.
- Every charity has to have “charitable purposes for the public benefit.”
- Name your charity.
- You charity will need a structure.
- You must create a “governing document.”
- If your income is over £5,000 a year you must register with the Charities Commission. You will also have to register if you set up a charitable incorporated organisation (CIO).
Trustees are the people that are responsible for the general control, management and administration of the charity. You must choose your trustees carefully as they are the people who will make the decisions on how the charity operates.
Sometimes trustees are also referred to as committee members, governors or directors in the charity’s governing document.
2. Charitable purposes for the public benefit
To qualify as charitable, you must choose a purpose which falls under one or more of the ‘descriptions of purposes’ listed in the Charities Act. These are for the advancement or promotion of:
- health or saving lives
- citizenship or community development
- animal welfare
- human rights, conflict resolution or reconciliation or the promotion of religious or racial harmony or equality and diversity
- amateur sport
- arts, culture, heritage or science
- efficiency of the armed forces of the Crown, or of the efficiency of the police, fire and rescue services or ambulance services
- environmental protection or improvement
- The relief of those in need, by reason of youth, age, ill-health, disability, financial hardship or other disadvantage
- The prevention or relief of poverty
- Any other purpose currently recognised as charitable or which can be recognised as such by analogy to any of the above.
Whichever purpose(s) you choose, you must ensure that your charity is for the public benefit.
3. Name Your Charity
You need to choose a distinctive name for your charity but you must make sure that it isn’t the same or similar to a charity that is already set up. You can’t use trademarked words, offensive words, or be misleading by suggesting your charity does something that it doesn’t.
You can search the charities register to make sure that the name you want to use isn’t already taken by someone else.
If you are registering your charity as a company and you want to use the word charity, charities, or charitable in the name, you will need to show proof that you have obtained the Charity Commission’s approval for the use of these words in your charity’s name.
4. Choose a Charity Structure
Charities can take a variety of forms. The structure will affect decisions such as who runs the charity, how the charity is run, and what the charity can do; for example, own property or employ people.
There are four common charity structures:
- Charitable Company - if you choose this structure your company must register with Companies House as well as the Charity Commission. Trustees in a charitable company may have limited or no liability for the company’s debts.
- Charitable Incorporated Organisation (CIO) – this can be created by registering with the Charity Commission. You don’t need to register with Companies House. Trustees may have limited or no liability for the company’s debts.
- Charitable Trust – this is a way for a group of people, ’trustees,’ to manage assets such as money, investments, land or buildings. They are often set up when large sums of money are left by way of inheritance into trust, and then used for funding other schemes.
- Unincorporated Charitable Association - this is a simple way for a group of volunteers to run a charity for a common purpose. It could be a youth club, or local community group. Unincorporated charitable associations can’t employ staff or own premises.
5. Creating a Governing Document
Every charity must have a set of rules, known as a governing document, to explain how the charity is run. It lets trustees and anyone who is interested find out more about you.
The governing documents should include:
- Its name
- your charity’s purpose (‘objects’)
- what it can do to carry out its purpose (‘powers’)
- who runs it (‘trustees’) and who can be a member (if appropriate)
- how meetings will be held
- how many trustees will be appointed;
- rules about trustees’ expenses;
- rules about payments to trustees;
- whether the trustees can change the governing document
- how to close the charity.(‘dissolution provisions’)
The type of governing document you create depends on the structure you have chosen for your charity. It’s a good idea to get a business lawyer to help you create this as it will ensure you have done everything legally and that nothing you have included in the document is invalid.
6. Registering Your Charity
If your charity brings in at least £5,000 per year, is based in England or Wales, or it’s a charitable incorporated organisation (CIO), you must register it with the Charity Commission.
You will be asked to supply information about your charity including what the charitable purposes are, how it’s run for the public benefit and proof of income over £5,000. You will have on-going obligations to the Charity Commission and to Companies House if you are also registered with them.
Getting the Right Advice
Before embarking on setting up a charity we would advise you to get proper legal advice to make sure that you do everything right first time. You wouldn’t want your charitable efforts stalling before they’ve even begun to start.
Our team of business lawyers at Slater and Gordon can help you with any legal advice you need to set up your charity. Call us on freephone 0800 916 9052 or contact us online and we will call you.