A charity is an organisation which is established for the public benefit and which has purposes (the charity’s objects) which are exclusively charitable. Having decided that you would like to establish your organisation as a charity you will need to do the following:
1. Decide what your charitable objects will be;
A charity’s objects are the purpose it is set up to deliver and these drive everything that it does.
Charities can have more than one purpose, but everything a charity does must be in furtherance of its charitable objects. A charity cannot have purposes that are not charitable.
Usually the charity must register with the Charity Commission and with HMRC. The Charity Commission has model objects on its website, using these assists with registration.
2. Find trustees to govern the charity;
The charity trustees have the general control and management of the administration of the charity. They are responsible for the strategic direction of the organisation.
The trustees will decide the direction the charity will take it is therefore very important you select the right people with the right expertise and experience. You may look for particular skills such as fundraising, management, finance or general charity experience.
Choose a name for the charitable organisation;
A charity wants their name to be immediately recognisable and distinct from that of any other charitable organisation.
The name must not mislead the public in any way. It is the responsibility of the trustees to name the charity. They must ensure that permission is not required for the use of the name and that the name is not already being used.
For some organisations, it is important to establish a recognisable charity brand to attract attention. A good name can be the first step to doing so.
3. Select which legal form the charity will take;
Some of the legal forms available to charities are unincorporated, whilst others are incorporated. It is very important to understand the significant differences between the two. Incorporated legal forms protect trustees from liabilities to third parties better than an unincorporated legal form, but there is usually more regulation; for example a charitable company also has to comply with company law.
There are a number of legal forms which are suitable for charities. It is essential to choose the legal form most suited to your charity’s purposes and intended activities.
4. Produce a governing document; and
Every charity will have a formal document that defines what it is set up to do, and how it will work. It is important to note that different legal forms will have different types of constitution.
A governing document will include the charity’s name, its objects, its powers, trustees’ appointment and removal amongst many other general administrative requirements of the charity.
5. Registering with the Charity Commission and HMRC
Charities based in England or Wales and with an income of over £5,000 per year must register with the Charity Commission. If your charity is a charitable incorporated organisation it must register regardless of its income. Charities are not obliged to register if they are excepted or exempt from registration: more information can be found here.
Charities can benefit from certain charitable tax reliefs. These are only available to charities once they have registered with HMRC.
The BWB Get Legal decision making tool, which can be found here, will help you select the most appropriate type of legal form for your charity.
If you have any further queries regarding charitable status, take a look at the range of guidance notes available in the customisable documents section of the site examples of which include:
Alternatively for bespoke advice please do get in touch with one of the Charity and Social Enterprise team.