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What are charities?

Charities must follow charity law, which places strict conditions on how they are run and what they can do

A charity is a voluntary organisation that is set up to benefit the public in a way the law says is charitable. For example, helping to improve education or relieving poverty.

Charities are run by volunteers, known as ‘trustees’. They are subject to charity law, which places strict conditions on how they are run and what they can do. Because they benefit the public, they receive tax breaks and other benefits.

Charities can be registered or unregistered. Charities with a yearly income of less than £5,000 don’t have to register, although they can still claim the same tax benefits. Common types of charity include:

• charitable companies (limited liability companies registered with Companies House, also known as ‘incorporated associations’)
• unincorporated associations (usually smaller organisations with a lower turnover)
• trusts

There are other forms a voluntary organisation can take without being a charity (see ‘Alternatives to setting up a registered charity’).

• Alternatives to registering as a charity

• Deciding if you want to start a charity

Charitable companies

You may want to register your charity as a limited liability company if it's likely to deal with financial risks. This might be because:

• it has a large income
• it employs people
• it enters into contracts to deliver or use services
• it owns land or property

An example of a charity that is a limited company might be a local arts charity that organises promotional events. They might need to be a limited company in order to hire a lighting company for an event.

• Advice on setting up a limited liability company from Business Link Opens new window

Unincorporated associations

You may want to use this structure for your charity if:

• the organisation has members whose views need to be reflected in the running of the organisation
• the members of the organisation elect trustees for a fixed period of time
• members are involved with the running of the organisation
• the organisation does not have very large assets (property, land or investments) or a high turnover
• the organisation won't need to hire staff or enter into any other contracts

Examples of an unincorporated association might be a residents association that meets to improve the local area.

• Unincorporated associations guide from Business Link Opens new window

Trusts

Creating a trust may be advisable if:

• the organisation will be run by a small number of people and its administration will be simple
• trustees will be chosen by existing trustees and there is no time limit on how long they will be in office
• the organisation is not likely to need to rely on members for its administration
• the organisation’s sole activity is giving grants
• land and buildings are to be held in trust for the charity's permanent use
• there is to be a restriction on spending the charity's capital

This type of charity might be set up by a group wanting to distribute the funds left in a will for a particular purpose.

• Information on trusts from Business Link Opens new window

Getting help and advice

Deciding on the best structure for your organisation can be complicated so you may want to get professional advice. Your local council may have details of places that can give advice.

• Find your local council

• Sources of legal advice from the National Council for Voluntary Organisations Opens new window

More useful links

• Advice about different types of charity from the Charity Commission Opens new window

• Model governing documents for different types of charity Opens new window

Useful contacts

• Home and community contacts