Thinking about starting a charity? Here’s what you need to know

At its core, charity can be simplified to the concept of helping others, no matter how many people it reaches. For many people with an idea for change, building a charity can be a powerful way to build a legacy and in doing so can often become an extension of their own private wealth planning.

You may have the intention to make a positive impact in society but thinking about the bigger picture and building this into something bigger can often seem trickier. Starting your own charity can often seem daunting due to the legal requirements involved however, it is a common misconception that you need extensive technical knowledge in the field to begin with. This guide will go through what to expect if you are thinking of starting your own charity and how to make the process of more manageable.

Starting with a purpose

Having a clearly defined purpose and identifying those who you envision benefitting in line with Charity Commission guidance is a great starting point. Working this concept through with an experienced charity specialist can then help your vision to take shape and better understand how to give you direction on this journey. Choosing the right advisor for you will often be supported by companies or individuals working with you to understand what your charity is trying to achieve and those who will help to tailor this into a working, registered entity, in line with practical and legal requirements.

Choosing the right structure for your charity

One of the most important steps is to make sure that you choose the right structure for your charity with the most common structures including charitable incorporated organisations (CIO) and charitable company limited by guarantee (CLG) and charitable trusts. Each has their own benefits and disadvantages that should be strongly considered before deciding. This will ensure that it is fit for the purpose you intend. If for example, liability is a big concern for you then a CLG may be worth considering as it often runs as its own legal entity. If you are focused on the long-term management of charity assets and funds and prefer fewer administration requirements, then a charitable trust should be looked into.

It is important to remember that the structure you choose will be the one of the driving factors that affects how your charity will operate. When deciding on the appropriate structure you should consider how the day-to-day running of the charity will look, who will be involved, the legal identity you wish to have for the charity, where charity funds originate and how the funds are to operate.

This structure will also impact type of governing document your charity will create and use. The governing document will then be your charity’s handbook for as long as they operate. This document should include all of the terms and conditions for how your charity will run, how decisions are made and how funds are managed. It will also confirm the appointment of your chosen trustees who play a vital role in the operation of a charity. It is therefore important to ensure the right individuals are chosen for this role. Trustees must always ensure that they are acting in the best interests of the charity as they will be making key decisions that affect the reputation, longevity and performance of the charity.

There is widely available guidance published by the Charity Commission to help assist you through these points, although it can also help to discuss any specific concerns with a specialist advisor.

Registration

Registration is the final step to setting up your charity. Ensuring that your charity is registered with the Charity Commission encourages public credibility with a recognised identity, provides greater funding and tax opportunities and allows for longer sustainability. In order to complete registration, you must have at least £5,000 in a charity bank account to show that the charity can operate once registered.

Managing your charity going forward    

Once your charity is registered, annual records of the operations of your charity must be maintained. Any changes to the structure of your charity must be recorded and clear accounts of where charity funds are used must be regularly maintained. It is important to note that your trustees will play a vital role in this. Staying on top of compliance isn’t just about the paperwork involved – this is what often makes the difference to ensure your charity is sustainable in the future.

Understanding the steps involved in setting up and maintaining a charity can help to make the process much more manageable than it can first appear. When thinking about longevity, it can be invaluable to have a trusted advisor onboard who not only guides you through the process of registering your charity but is able to continue to support you beyond this and give you confidence in building a legacy that lasts. If you would like to discuss this further, please get in touch with us on 0161 509 5020 or enquiries@privateclientsolicitors.co.uk.