Legal Structures for Charities and Social Enterprises
The range of legal structures available for voluntary sector organisations is wide. The following sets out some of the key points to consider if you are formally establishing a new organisation; require changes due to growth, or; because you will be undertaking new activities such as trading to generate income.
Is the choice important?
Choosing a legal structure is one of the most important decisions to be taken in setting up or expanding an organisation; it is vital that the chosen structure reflects the purposes, sources of funds and style of management that the organisation will adopt. Choosing the wrong structure can result in limits on eligibility for or access to funds as well as limitations on trading. Subsequently modifying or converting a structure can be complicated, time consuming and costly.
What structures are there?
For not for profit organisations, the range of legal structures is extensive and continues to grow. Registered Charity, Unincorporated Association, Trust, Company Limited by Guarantee, Community Interest Company, Charitable Incorporated Organisation, the list of available structures is long and the terminology can be confusing. Some structures may be combined; two or more may operate simultaneously.
So which would be right for you?
The important thing is not to jump into a decision too quickly. Think about just what you want your organisation to do; how it will be managed; do senior managers need to take a salary and where do you expect funds to come from? With answers to these questions in mind, the choice of structure becomes a lot simpler and should not need costly and time-consuming revision at a later date.
Too complicated for your needs?
The recently published model constitution for small charities is intended for those with an annual income below £5000, that don’t own buildings or employ people and do not intend to register with the Charity Commission.
Barely three pages long, and written in plain English, this new model provides a simple description of the governance of small charitable organisations. The model and guidance notes may be found on the Charity Commission. For newly formed small charities, this offers a quick and simple initial governing document. If income grows beyond £5000 pa, the threshold for registration with the Charity Commission, or if property is to be owned or people employed, then one of the other forms of model governing document, or other legal structure, should be adopted.
As part of our Business Planning service, Charity Fundraising Ltd can provide advice on appropriate structures. However, we are not lawyers and always recommend seeking a professional legal opinion before committing to any changes in your legal structure.
