Guidance

Charity types: how to choose a structure (CC22a)

Decide whether to set up a charitable incorporated organisation (CIO), a charitable company or an unincorporated association or trust.

From:
The Charity Commission
Published
30 May 2014
Last updated
4 November 2014 鈥� See all updates

Applies to England and Wales

Types of charity structure

To set up a new charity, you must decide what sort of legal structure it will have.

Your charity structure is defined by its 鈥榞overning document鈥� (the legal document that creates the charity and says how it should be run).

The type of structure you choose affects how your charity will operate, such as:

  • who will run it and whether it will have a wider membership
  • whether it can enter into contracts or employ staff in its own name
  • whether the trustees will be personally liable for what the charity does

There are four main types of charity structure:

  • charitable incorporated organisation (CIO)
  • charitable company (limited by guarantee)
  • unincorporated association
  • trust

You need to choose the right structure for your charity, depending on whether you need it to have a corporate structure and whether you want to have a wider membership.

About corporate structures

Some charity structures are corporate bodies. If you choose a structure that forms a corporate body, the law considers your charity to be a person in the same way as an individual.

This gives your charity the legal capacity to do many things in its own name that a person can do, such as:

  • employing paid staff
  • delivering charitable services under contractual agreements
  • entering into commercial contracts in its own name
  • owning freehold or leasehold land or other property

If a charity structure is a corporate body, generally its trustees aren鈥檛 personally liable for what it does.

If your charity isn鈥檛 a corporate body (鈥榰nincorporated鈥�):

  • the trustees are personally liable for what it does
  • it won鈥檛 be able to enter into contracts or control some investments in its own name
  • two or more trustees, a corporate custodian trustee or the charities鈥� land holding service will have to 鈥榟old鈥� any land on your charity鈥檚 behalf

About charities with a wider membership

Some charity structures have a wider membership. If you set up a charity with a wider membership, it can have members who vote on important decisions (usually at AGMs). For example:

  • appointing committee members who will run the charity (usually for fixed terms)
  • making changes to the charity鈥檚 governing document

A charity with a wider membership may carry out its work wholly or partly through the voluntary effort and contributions of its members. Having people your charity helps as members can help you take account of their views.

If you set up a charity with a wider membership, it mustn鈥檛 be set up only for the benefit of your members unless:

  • a sufficient section of the public can access those benefits by becoming members 鈥� for example, anyone can join
  • the membership structure is a suitable way of carrying out your charity鈥檚 purposes for the public benefit 鈥� for example, members of an amateur sport club

Some charity structures don鈥檛 have wider members 鈥� the trustees decide how their charity is run and make all decisions on:

  • how it spends its money
  • how new trustees are appointed

Charities with a corporate structure: which type to choose

With wider membership

Set up an association CIO if you want your charity to be a corporate body and have a wider membership, including voting members other than the charity trustees. You must:

  • have a constitution as your governing document 鈥� use the Charity Commission鈥檚 model association CIO constitution (or stay very close to it)
  • register your CIO with the commission for it to legally come into existence
  • keep a register of its members and trustees
  • send its accounts and annual return to the commission each year, regardless of its income

Alternatively, you could set up a charitable company: a corporate body which can be set up with or without a wider membership. Choose articles of association as your governing document.

Charitable companies can never be the same as commercial companies. Unlike commercial companies, a charitable company:

  • can鈥檛 distribute its surpluses to its members or shareholders 鈥� a charitable company is usually limited by guarantee, not shares
  • can only apply its assets to carry out its charitable purposes
  • must operate in a way which is in the best interests of the charity

You must register your charitable company with both the commission (if eligible) and Companies House. You鈥檒l also need to provide detailed information on its finances and activities each year.

Without wider membership

Set up a foundation CIO if you want your charity to be a corporate body, the only members are the trustees and you don鈥檛 want a wider membership. You must:

  • have a constitution as your governing document 鈥� use the commission鈥檚 model foundation CIO constitution (or stay very close to it)
  • register your CIO with the commission for it to legally come into existence
  • keep a register of its trustees (who are also the members)
  • send its accounts and annual return to the commission each year, regardless of its income

If you are an existing charity wishing to convert to a CIO structure, choose the CIO model constitution which best matches your original charity. Use the association model if your original unincorporated charity:

  • has a constitution as its governing document
  • has a wider membership which votes on important decisions, such as electing trustees or committee members

Use the foundation model if your original charity:

  • is governed by a trust deed, will, scheme or conveyance
  • is run solely by its trustees
  • doesn鈥檛 have a voting membership

Complete the appropriate CIO constitution template as your new CIO鈥檚 governing document. Once the trustees agree the constitution, register your new CIO with the commission.

Whichever CIO model constitution you choose, if in the future you decide that the other constitution better suits your charity, you can amend your constitution to make the changes.

Charities without a corporate structure: which type to choose

With wider membership

Set up an unincorporated association if you want your charity to have a wider membership but it doesn鈥檛 need a corporate structure (for example, if it will be relatively small in terms of assets). Choose a constitution as your governing document.

Without wider membership

Set up a trust if your charity doesn鈥檛 need a corporate structure or a wider membership. For example, if it:

  • is unlikely to employ a significant number of staff or carry on any kind of business
  • makes grants but doesn鈥檛 do any other type of work

Choose a trust deed as your governing document. It must specify a sum of money, land or some other assets that your charity will start with (it doesn鈥檛 matter how much). Otherwise you won鈥檛 be able to register it with the commission.

How to write your governing document

Write your governing document once you鈥檝e decided on a structure. This needs to set out your charity鈥檚 purposes and how it will be run. Read How to write your charity鈥檚 governing document for more information.

How to change your charity鈥檚 structure

A charity can usually change its structure if its trustees decide that a new structure would better suit the way it plans to operate.

This can be complex depending on what you want to do. Read Change your charity鈥檚 structure for more information.

Updates to this page

Published 30 May 2014
Last updated 4 November 2014 show all updates

  1. Added translation

  2. First published.

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Contents

Part of Set up a charity: step by step

  1. Step 1 Check if setting up a charity is right for you

    1. Check the alternatives to setting up a charity

  2. and Check you're eligible

    1. Check if your organisation can be a charity

  3. Step 2 Find trustees

    Trustees are responsible for the operation of your charity. They must show they understand their legal requirements.

    1. Check who's eligible to be a trustee and what skills they need to have
    2. Find and appoint trustees
    3. Read about your trustees' legal responsibilities

  4. Step 3 Find out how to choose a charity structure

    1. You are currently viewing: Choose the right charity structure

  5. and Choose a name for your charity

    There are rules on what words you can use in your name.

    1. Check what you can call your charity

    You cannot register a name that's the same as or similar to another charity.

    1. Check the names of registered charities

  6. and Decide and write your charity's purposes

    Your 鈥榩urposes鈥� describe what your charity is set up to achieve.

    1. Find out how to write your charity's purposes

  7. Step 4 Create a governing document

    The governing document is a set of rules that explains how your charity is run. It needs to include your charity's structure, name and purposes.

    1. Find out how to write your governing document

  8. Step 5 Make sure you meet the 'public benefit requirement'

    Your organisation must be able to show that it benefits the public.

    1. Check how your organisation must benefit the public

  9. Step 6 Register your charity

    You must apply to register your charity with the Charity Commission if either:

    • its income will be at least 拢5,000 per year
    • it鈥檚 a charitable incorporated organisation (CIO)
    1. Register with the Charity Commission

    You can register your charity鈥檚 details with HM Revenue and Customs (HMRC) to get tax back on things like Gift Aid donations.

    1. Register with HMRC