How Do You Form a Charity?
You may like the idea of changing people's lives for the better, and so you think of forming a charity. This can be a good way to give back to your local community, or to help others all over the world.
To set up a charity, it's no easy task. But hopefully, our handy guide will talk you through the process step-by-step and help you understand the legalities involved.
What is a charity
A charity can be described as an organisation set up to benefit a charitable purpose. The type of person that starts a charity is usually someone that's happy to put the needs of others above themselves.
Why do people set up charities?
Most charities are started because of an issue or World event that's not being addressed appropriately by governments or society in general.
Most smaller charities are set up because of a life event concerning one of the founders. For example, the death of a family member, or a long term illness.
How is a charity different from a business?
After you have set up a charity, you will be unable to carry out non-charitable work under the name of the charity. This means you will be unable to carry out a mix of business. For example, if you are running a for-profit business but you want to donate a portion of your profit to charity, you will be unable to do this while registered as a charity.
If this is something you were considering doing, you may find it best to set up a Community Interest Company (CIC) or a Social Enterprise.
How will you fundraise for your charity?
When you're starting your charity, you need to consider how you'll raise funds for the day-to-day operating of it. If you're planning on relying on government grants, then you'll have to come to the realisation you may not get them. This is because there are multiple other charities out there also competing for them. This can mean you will need to do other fundraising activities to help support and sustain your charity.
Also keep in mind that most government grants run out after 12 months, which means you will need to reapply the following year. When reapplying there is no guarantee that you'll receive the funding.
Creating your charity business plan
Like every business, your charity will need to have a business plan in place to dictate which direction it is going in.
When creating the business plan, keep the goal of the charity at the forefront of your mind. You will need to set out the steps that will be required in sourcing and delivering the help to those that you wish to help.
Another thing a charity needs to consider is the end-user. You need to sit down with the people/causes you want to help and see how you can provide help to them. By understanding how you can help, you can work towards this goal rather than aimlessly raising funds, or helping in all the wrong ways.
You may find it helps to start with your end-user and work backwards from their needs to make sure you're doing everything you can to help them.
Take time to research your funding options. If your business plan is vague, or not fully thought out, you may find that larger organisations aren't going to be willing to provide you with the funding you require.
Charity rules and regulations
If your charity generates more than £5,000 in revenure, you must register with the charity commission. Once you are registered, you'll need to meet a rigorous set of standards.
You will need to have a robust charity structure in place. This involves adopting a governing document and officially appointing trustees. There are 4 different types of charity structure you can choose from:
- Unincorporated associations: Ideal for small charities which earn under the threshold. However, the trustees will be held liable for everything the charity does. This type of charity doesn't have a legal status.
- Trusts: This is good if you already have money that you want to give to a charitable cause. Trusts don't have a separate legal status.
Charitable incorporated organisations (CIO's): CIO's are similar to limited companies but only need to register with the Charity Commission.
- Charitable companies: These operate like a company limited by guarantee. Your charity is able to operate in the same way and have employees, property, and assets. This is usually more flexible and has its own legal identity. Your charity will need to be registered with Companies House.
Hopefully this post has made it a little more clear as to what you can expect when you want to register a charity. Also, you will need to think carefully about what charity structure you want to register as. It is always best to seek professional advice when you're thinking of registering a charity to make sure that everything you're doing is correct and you're able to help the causes you've set out to.