A Guide to Forming Your Own Charity
If you would like to help people change their lives for the better you may be considering setting up a charity. This is a very good way to ensure that your charitable efforts go to those in need and can be a great opportunity for you to give something back to your local community or to help people all over the country – or even the world!
There is no denying that setting up a charity is no easy task, but hopefully, this guide to setting up your own charity will help you in a step-by-step way while at the same time helping you to understand the legal ramifications of operating a charity.
Understanding what a charity is
When a person wants to start up their own business, they usually do this because they want to help themselves. They are looking to establish some financial independence and to be their own boss free from the shackles of a traditional 9-5 job working for someone else.
On the other hand, those who wish to set up a charity will have other people’s interests at heart rather than their own.
The Charity Commission describes a charity as ‘an organisation set up to benefit a charitable purpose, a charity’s goals have to be completely altruistic.’
Currently, there are over 160,000 registered charities in England and Wales. Starting up a charity has become a very popular option for people interested in helping others and making a difference to the world.
The type of person that starts a charity is someone happy to put the needs of others above themselves. If this best describes you, then setting up a charity could be the right thing to do.
Why do people set up charities?
Many charities begin in response to an issue or world event that isn’t being addressed by Government or society in general or isn’t considered to be helped enough by the state or the powers that be.
A lot of small charities are set up in response to an event that is personal to the person concerned. This could be because of a major life event such as a loss of a family member or the desire to provide a local community project with the funding it needs to move forward and thrive.
The majority of charitable organisations in the UK are very small concerns compared to the larger and more well-known charities such as the Samaritans, Cancer Research UK, NSPCC, Oxfam and the RSPCA. Despite these big-hitters of the charity world, they still only make up less than 1% of UK-based charities.
Understanding how a charity is different from a business
An important point to consider before setting up a charity is that you will not be able to conduct a mix of business. What this means is that you are not allowed to do charitable and non-charitable work under the banner of your charity.
If you are approaching this idea intending to generate a profit then donating a portion of your business profit to charity, then you cannot do this as a registered charity.
If this is something that appeals to you, then you may instead consider setting up a social enterprise or a Community Interest Company. These are known as ‘third sector’ organisations and are worth considering before you jump right into forming a charity.
Fundraising for your charity
You need to realise that running a charity is very hard work that requires a lot of patience, determination and commitment to your cause.
When starting your charity you need to consider how you are going to raise the funds to operate it. If you plan on relying on government grants for example, then you must realise that these are often bid for by lots of other charities seeking funding.
It can be a very competitive marketplace to solely rely on government grants to keep your charity going, so you need to work on other fundraising activities to help support and sustain your charity once your grant funding has run out.
Most government grants are awarded for a set period and are often no longer than 12 months in duration, meaning that you will need to apply again next year for the same funding with no guarantee that you will win again.
Creating your charity business plan
Like every business, social enterprise and community organisation, you will need to create a business plan for your charity.
Obviously, you will have a goal in mind for your charity, so your goal will help you to form your charity business plan. You need to set out the steps about how you are going to source and deliver your help to those you wish to help.
Understand your end user. Sit down and talk directly with them to understand how best they can benefit from your help. Having a good understanding of your end beneficiaries needs and the most direct way to deliver what they need is essential if your efforts are going to be effective.
It can actually help to reverse-engineer your charity business plan by starting with your end-user and working backwards to put the steps in place to deliver what they need most efficiently.
Your charity business plan needs to be well researched, flexibly and workable if you want to use it to your advantage. There are many different funding opportunities out there from government grants to the National Lottery and other funding organisations.
Take the time to research your funding options and use your charity business plan in your application for funding – in most cases applying without one will not get you very far!
Charity rules and regulations
It is important to know that if your charity generates more than £5,000 in revenue, it must be registered with the Charity Commission. Once registered, your charity will need to meet with a very rigorous set of standards.
Before your charity can be registered with the Charity Commission, it needs to have a robust charity structure. This involves adopting a governing document and officially appointing trustees.
There are four types of charity structure that you can chose to work with, each has its advantages and disadvantages. These are:
- Unincorporated associations: Ideal if you intend your charity to stay small and earn under the threshold. However, you and your other trustees will be held personally liable for everything your charity does. This charity type doesn’t have a separate legal status.
- Trusts: This is good if you already have money that you want to give to a charitable cause. Trusts have no separate legal status.
- Charitable incorporated organisations (CIOs): The newest sort of legal structure for a charity. CIOs carry similar benefits to being a limited company but only need to register with the Charity Commission.
- Charitable companies: This operates like a private company limited by guarantee and your charity can operate in the same way and can have employees, property and business assets. This is generally a more flexible option and has a separate legal identity. Your own personal finances and assets will be protected because your charity will have its own legal identity. Your charity will also need to be registered with Companies House.
Forming your charity – made easy
Fortunately, there is a smooth and simple way available to make registering your charity easy on yourself. More charitable companies limited by guarantee are being incorporated in the UK simply because of the greater flexibility that this form of charity structure offers when compared to the other three charity model options.
Your Company Formations offers you our considerable experience to clients wishing to set up charitable companies limited by guarantee.
We have made the whole process as simple for you as possible. We even provide you with a set of model articles which you can amend to meet the guidelines required to be considered as a charitable company.
However, if you have already worked with a solicitor to draw up a set of Bespoke Articles for your charity, then we can file them on your behalf during the incorporation process.
Here is what’s included in our Charity Formation Pack:
- Filing fee inclusive – we pay the Companies House filing fee on your behalf
- Fastest service – charitable company limited by guarantee incorporated within 2-6 hours (depending on Companies House)
- Successful application for limited name exemption using your own Articles of Association or you can edit our legally-checked set of Articles to include your company objects or edit our model
- Successful application to include Benevolent, Association, Society, Federation, Trust, or Foundation in your company name using your own Articles of Association or you can edit our legally-checked set of Articles to include the sensitive words of your choice
- Our bespoke Model Charity Articles package allows you to upload your own personalised Articles or to use Your Company Formation’s legally-checked set of Articles
- Certificate of Incorporation delivered by email and on high-quality paper
- Guarantor certificates delivered by email and on high-quality paper
- Memorandum and Articles of Association delivered by email and on high-quality paper
- A free business account with cashback (subject to acceptance)
- A free merchant account with cashback (subject to acceptance) (allowing you to accept debit and credit cards) allowing you to accept donations
- Free online company manager – manage your limited by guarantee company online and receive company alerts and reminders
- Free support for the life of your charitable company
- Free review – our team will review and check your order before dispatch to Companies House
- Google AdWords – spend £25 and receive a free £75 voucher to spend marketing your limited company by guarantee online
- Internet presence starter kit – we’ll pay for your .co.uk or .com domain name for the first year
- Incorporating a Charity Company – our service
Our charity formations process is much more pain-free and cost-effective than trying to register your charitable company by yourself or through a solicitor. Our charity packages start from only £39.99. You can check to see if your preferred charity name is available too!
For help and advice on forming a charitable company, please call us on 0207 689 7888 or email us at firstname.lastname@example.org
What about changing a limited company to a charity?
If you already run a registered limited company and wish to change it’s structure to that of a registered charity limited by guarantee, you can make changes to your Articles of Association rather than closing down your business and setting up a new charity.
Find out more about changing your structure and the steps involved in our blog: How Can You Amend Articles of Association for a Charity?