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Setting up a charity

Starting up a charity |  Chris Brignell | Dreamstime.com

Now it may be that your business idea means that you need to be a registered charity, but how do you go about registering it? I for one had no idea of the complexities involved until I started talking to a local animal shelter who was going through the process of doing just that.

There are currently over 150,000 main charities registered with the charity commission, so bear in mind that there may be a charity set up already with what you had in mind, it is worth checking into this as it may impact your donations if there is already an established charity for the same or similar cause in your local area. You can check details of all the English and Welsh registered charities at the Charity Commissions Website.

It is worth taking the time to think about why you want to be a registered charity, if it is simply that you feel you want to “help” your chosen cause, maybe it would be enough to volunteer with an existing charity to help out, rather then set up your own. If you decide you would like to volunteer, there are several websites out there to help find you the perfect placement, including:

If you want to get more people involved maybe speak to your boss about contacting the charities aid foundation who specialise in helping people and companies donate to charity.

What sort of organization does it need to be?

If having looked at the various options, and spoken to other people that would be involved, you have decided that you wish to proceed with creating your own charity, the next step is to ensure that you can meet the legal requirements that it can be setup to exclusively carry out charitable work, and exist for the public benefit. If you are unsure if your idea would fit these criteria then it might be worth seeking legal advice, if you need general advice on your charity idea, it may be worth reading the (Charity commissions commentary on the charitable purposes, set out in the Charities Act 2006, and its section on guidance on public benefit.

If you feel that you would want to perform a mixture of activities, but that only a portion of these would be for charitable purposes, you may find you need to set up a non-charitable entity. You could still run it as a non-profit organisation that would benefit the community (examples are things like a community interest group, or provident society), or even run it as a wholly commercial company, whichever way you go, you can donate some or all of the surpluses to your chosen charity or cause.

In addition to the options already mentioned, there is the choice of setting up as a charitable trust, which can be a good way to ensure that money is dedicated to a particular charitable purpose. You could run as an unincorporated organisation, which would operate in accordance with a written constitution.

If the charity is going to act more like a business however, borrowing money, owning property, employing staff, etc, then it would be most sensible to set it up as a corporate body that can do all the charity would need in its own right.  Operating this way also affords the trustees and members of the charity some degree of protection by limiting their liabilities.

Traditionally corporate charities have been established as companies limited by a guarantee, or an industrial or provident society, butthe government is finalising the legislation for a new body specially designed for charities. This is the charitable incorporated organisation or CIO – more details of which can be found on their website.

The next step

Having sorted out what sort of organisation you will be, you then need to project what your levels of income are likely to be as this will determine if you need to register with the charity commission. If the charity is based in England or Wales, and is likely to exceed £5,000 per year, then it will probably have to be registered. Registration will involve you completing various charity commission forms, which are available on its website, and being subject to the scrutiny of the Registrations team for the Commission.

How long will it take?

The thing that will probably take you the most time in this whole process is your background work, deciding what cause you want to support, what sort of organisation would best suit your needs, and how you intend to operate, once these details are in place you can move forward fairly quickly.

The physical start up of your organisation will vary in speed depending on the route taken, with corporate or provident societies taking a but longer then some of the other methods that could be set up within a day if necessary.

In addition to that, if you need to register with the Charity Commission, it will be another slight delay, they aim to decide on registrations within an average of 40 days, but it can take considerably longer, especially if you have many criteria you need to match. It is even possible that before the commission will ok an application that they will require some redrafting of the charities constitution.

What else do I need to know?

The charity will need to have appointed Trustees, these are individuals that are legally responsible for the overall management in a charity, and are responsible for all the decision making on behalf of the charity.

It isn’t a position to be taken lightly as it can be a challenging role and the Trustee is agreeing to be ultimately responsible if something goes wrong within the charity, either legally or financially. That said, it can also be an extremely interesting and rewarding role.

There are some people who can not be appointed Trustee by law, these include:

  • Anyone who has previously been removed from a trusteeship of a charity by the courts or the Charity Commissioners.
  • Anyone who is under a disqualification order under the Companies Directors Disqualification Act 1986
  • Anyone who has been convicted of an offence involving deception or dishonesty, unless the conviction is spent
  • Anyone who is an un-discharged bankrupt

Trustee’s can serve for a number of years, the length of their term of service is normally set out in the charities governing document.

As well as making sure you have the right Trustee(s) in place, it is worth you looking at a solicitor who can aid you should you need it, it makes sense to do this before the event so that you can build a rapor with them and be sure you are happy with their methods before you actually need them for something important.

It is important to make sure you get on with your chosen solicitor but it is also equally important to ensure that they have undergone suitable training to deal with charity trustees and understand their needs correctly.


 
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