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Starting your own charity

 

Highlights

  • An operational charity is one which carries out charitable activities directly, for example helping disadvantaged people or animals or raising money for a cause.
  • Before setting up a new charity, it’s important to consider whether this is the most effective way to use your time and money in support of a cause.

 

Read more about Starting your own charity

There are over 160,000 registered charities in England and Wales, with numerous working in each field. These charities compete for funds, pay separate set-up and administration costs, and each have to find dedicated trustees. It is usually more efficient to pursue your charitable aims by working with existing organisations rather than create duplication.

Charitable context
Before setting up a new charity, it is vital to gain an understanding of the wider charity context, and assess the existing charities working in the field. If they are well established and regarded with an effective programme of work and good trustees, you may feel you can achieve your aims by funding a specific project within that charity. You can find charities working in specific fields or geographical areas by searching on the regulator’s website, or by searching for a membership umbrella body for the sector (e.g. Help the Hospices or Homeless Link).

To operate effectively, new charities have to build their reputation and credibility, and learn about how the charity world works. New organisations should also aim to build networks with other charities and build on existing expertise and good practice.

Reasons to start an operating charity
There may be compelling reasons to set up a new charity if the organisation will have a different and unique focus, or the charity will be associated with a particular person whose name will make a difference.

There is a stronger case for setting up a new organisation if you have a group of engaged individuals who want to direct how the charity operates and are eager to invest the time and skills needed to run it on a voluntary basis as trustees.

Issues to consider
Think carefully about your own commitment of time and resources, as a new charity is likely to need your dedicated attention over a long period. It is important to think about whether the charity will be sufficiently funded to make a difference to its core purposes, and sustainably funded in the long term. If you do not plan to fully fund the charity in perpetuity, it is essential to plan your fundraising approach early, and be confident that the cause will continue to receive the level of funding it deserves.

Once registered, charities must operate as public organisations and publish accounts which are displayed on the Charity Commission website. The trustees have a legal duty to take decisions which best achieve the charity’s stated purposes, and the views of the board may not always be congruent with those of the founder. Some founders find it difficult to defer to the collective views of trustees on the organisation’s strategy and use of funds.

With limited exceptions, founders and trustees cannot be paid for their time, and there are strict limitations on activities a charity can undertake which do not fall within its charitable purposes, even if these are designed to subsidise charitable activities. If these issues present a problem, you may wish to investigate alternative legal forms—such as the community interest company—as a vehicle to achieve your social aims.

The process of setting up
If you do decide to set up an operational charity, you will need to register with the appropriate regulator. This involves submitting an application form and documents including governing document, bank statements, and trustee declarations. Regulators provide models for governing documents which explain procedures for decision making and selection of trustees. The new charity needs to demonstrate that it delivers public benefit and that its activities fall within the legally defined list of ‘charitable purposes’. Detailed guidance on the registration process can be found on the regulators’ websites.

The simplest form of charity is the Charitable Association: registered only with the Charity Commission with relatively few reporting requirements. It may be suitable if you expect your charity to remain relatively small with few commitments. However if the charity is likely to incur liabilities through employing staff, investing in assets, or fundraising, it is important for trustees to limit their liability by registering both as a charity and as a company limited by guarantee. It is always best to consult an experienced lawyer or accountant, who can go through the process with you.

A version of this article, written by Philanthropy UK, was published in a previous edition of A Guide to Giving (2008).

Glossary: operating charity

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