There are 170,000 charities in England and Wales, with a turnover of a whopping £48 billion. Charities are organisations that are established to serve a particular charitable purpose and operate exclusively for charitable reasons.
There are several types of charity structures, each with its own advantages and disadvantages, and we briefly discuss which one might be best for your charity:
- Unincorporated Associations: This is a simple and informal structure which is ideal for small charities. Typically, a group of like-minded individuals with a shared charitable goal comes together to form such an association. Unincorporated associations are not separate legal entities from their members, and so the members are personally liable for the charity’s debts and obligations.
- Charitable Trusts: A charitable trust is a legal arrangement in which property is held by a trustee for charitable purposes. Charitable trusts can be created either during the donor’s lifetime or after their death. The trustees overseeing the trusts have a fiduciary duty to act in the best interests of the charity.
- Charitable Incorporated Organisations (CIOs): CIOs are a relatively new form of charity structure in the UK. They were introduced in 2013 to provide charities with a simple and flexible legal structure. Registered with the Charity Commission, these organisations have a separate legal personality from their members. This means that the trustees and members of a CIO are not personally liable for the charity’s debts and obligations.
- Community Interest Companies (CICs): CICs are social enterprises that operate for the benefit of the community. They are regulated by Companies House and must submit annual accounts and other reports. CICs can be established as charities or as non-charitable organisations.
- Companies Limited by Guarantee: This structure is often used by larger charities that want to have a more formal structure. A company limited by guarantee has members instead of shareholders and is managed by directors. Therefore, the liability of the members is limited to the amount they have guaranteed to contribute if the company is wound up.
These are just a few examples of the types of charity structures available. Each structure has its own benefits and limitations, and the choice of structure will depend on the charity’s size, purpose and goals. It is important to seek legal advice when choosing a charity structure.
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