How to set up a charity

If you are setting up a charity, then there are several initial questions that must be considered.

These are:

• What is our purpose?
• How do we know if becoming a charity is the right option for us?
• What will the structure of our charity be?
• How do we write the governing document and what are the requirements of it?
• What will our charity be called?
• How do we identify potential trustees and what role do they play?
• What funding options are available to us?

What is our purpose?

Your charity’s purpose is the sole reason why you are setting it up and what you are hoping to achieve. That’s not to say that your charity can’t have more than one purpose, but they must each be a charitable one. Charities exist to help people or the environment they live in and they are expected to have an impact in those areas they are working in.

There is a legal requirement for your charity to be run in such a way that is consistent with and supportive of the purposes that you have identified, with the expectation that it will exist for the benefit of the public. External bodies such as the Charity Commission and H M Revenue and Customs will look at your purposes to enable them to decide upon whether they are charitable and if there are any tax relief’s that you can qualify for.

Your purpose should state what the outcomes of your work will be, where and how they’ll happen and who the beneficiaries will be.

How do we know if becoming a charity is the right option for us?

Charities exist to benefit the wider public, but, needless to say, there are restrictions in place as to what they can do and how they can do it. Such restrictions include: the need to adhere to charity law; that trustees should not be personally benefitting from the existence of the charity; and be independent. Therefore, it is crucial that you check that the type of organisation that you want to set up can be considered a charity.

What will the structure of our charity be?

Once it has become clear that your organisation can be a charity and you have identified your purpose, you will need to examine which of the four main types of charity structure will be best for you. The options available are an unincorporated charity; a charitable incorporated organisation (CIO); a charitable company limited by guarantee; or a trust.

How do we write the governing document and what are the requirements of it?

Now comes the tricky bit!…..writing the governing document is a very important process as it is the legal document which will create the charity and specify the purposes you have agreed upon.

In short it will include: the name; the purpose; who the trustees are, how many trustees there must be and how they are appointed and removed; details of how meetings will be held; powers to make amendments to the governing document in the future; and how to close down the charity. However, for more information on writing, using and changing governing documents, read the Charity Commission’s article about ‘How to write your governing document (CC22b)’

The Charity Commission has prepared examples of two types of CIO documents.

What will the charity be called?

Although it may seem like the simplest of steps, your charity’s name is extremely important: People need to remember your name. It is your brand, so the trustees must deliberate carefully before agreeing upon it.

How do we identify potential trustees and what role do they play?

The charity’s trustees are the people who will make decisions about how to run the charity and are responsible for the management and administration of it. This means that they are required to make sure that: it is well-run; it is meeting the needs for which it was brought into existence in the first place; and that it remains solvent.

It is vital that you recruit enough trustees (to meet the minimum number set out in your governing document), but also that those you do appoint have a broad mix of skills, expertise and experience.

Recruiting trustees can be a very difficult and arduous process and at present charities are finding it an ever-increasing struggle to find suitable, willing persons. Nevertheless, it is tremendously important that the right persons are identified and appointed, as the trustees will form the heart and soul of your organisation.

What funding options are available to us?

As soon as your charity is formed, start raising money! You’ll need an active bank account to store the funds safely and will need to ensure that you are correctly accounting for the funds.

There are many ways to raise funds for a charity and so please look at the Charity Commission’s ‘Guidance on how to raise funds for your charity’ to help get you underway with this.