Legal Considerations for Launching Your Own Charity

Launching a charity in the UK is a noble but often complex task, with plenty to take on board if you want to do it right and give yourself the greatest chance of sustainable success. Here, Anna Bulmer, a director with leading accountants Harwood Hutton and a specialist in the charities sector, answers some of the most frequently posed questions about setting up and running a charity.

Anna, is it really that hard to set up a charity in the UK?

I don’t want to put anyone off but yes, it can be complex. However, if you have done your research, have a solid business plan and understand all the legal considerations, you should be able to navigate the path to successfully launching your own charity in the UK.

How many charities are there in the UK?

There are more 160,000 registered charities, all defined by the Charity Commission as ‘altruistic entities’. Whereas businesses can mix charitable and non-charitable activities, charities solely serve their charitable purposes. If you want to generate profits through a business for charity, you might want to consider social enterprises or Community Interest Companies. There is also the option to have a trading subsidiary company being 100% owned by the charity. Again, careful planning is needed.

Can we get by on government grants alone?

It’s highly unlikely. While government grants are common, competition is tough, so you should not rely on them exclusively. Consider diversifying your funding sources like using the National Lottery grants. Your business plan will need to show that you understand how your charity will meet the needs of the people it has been set up to benefit.

What are the formalities of setting up a charity?

Once your charity generates more than £5,000 in revenue, it has to be registered with the Charity Commission, which is a rigorous process. Before registering, your charity must establish a robust charity structure, which typically involves adopting a governing document and appointing trustees.

There are four common charity structures to consider:

• Unincorporated associations: These are suitable for small charities that do not expect to go beyond a certain revenue threshold. However, trustees of unincorporated associations bear personal liability for the charity’s activities, and this structure lacks a separate legal status.
• Trusts: These suit charities that already possess funds they wish to contribute to a charitable cause. Trusts also lack a separate legal status.
• Charitable incorporated organisations (CIOs): This relatively new legal structure for charities combines the benefits of limited liability companies with the simplicity of registering with the Charity Commission.
• Charitable companies: These operate in a similar way to private companies limited by guarantee, so you have the flexibility to employ staff, own property and engage in various business activities. This structure offers protection for personal finances and assets, as the charity possesses its own legal identity. Additionally, charitable companies must register with Companies House.

Selecting the right charity structure for your organisation is a critical decision. Your thought process needs to start with who will run the charity, how it will be governed and the range of activities it can undertake.

Can a limited company be converted to a charity?

If you currently operate a registered limited company and wish to transition it into a registered charity limited by guarantee, it is possible to amend your Articles of Association rather than start a new charity. This option allows you to leverage the existing structure and resources of your company while aligning its activities with charitable purposes.

Could we do all this on our own?

You could but you wouldn’t be surprised to hear me say it would be wise to seek the advice of professional advisers throughout the process. An experienced charities specialist such as myself can offer valuable insights and ensure compliance with all the accountancy requirements. A good lawyer should also be drafted in to prepare the application documents for submission to the Charity Commission.