Setting up and running a charity – guidance

How to set up a charity (CC21a)

Find out what it means to be a charity and what to do if setting up a charity is the right option for you.

Step 1: decide if a charity is the right option

Charities exist to benefit the public. Because of this, charities:

  • pay reduced business rates
  • receive tax relief
  • can get certain types of grants and funding

But charities are restricted in what they can do and how they work. For example, charities need to:

  • follow charity law, which includes telling the Charity Commission and the public about their work
  • do only things that are charitable in law
  • be run by trustees who do not usually personally benefit from the charity
  • be independent - a charity can work with other organisations but must make independent decisions about how it carries out its charitable purposes

By law, if you set up a charity you must apply to register it with the commission if it is a charitable incorporated organisation (CIO) or its annual income is more than £5,000, unless it is a specific type of charity that doesn’t have to register.

Check that your type of organisation can be a charity. There is a broad range of not for profit organisations and social enterprises: not all of these are charities.

For example, a community interest company (CIC) or an organisation registered with HM Revenue and Customs as a community amateur sports club (CASC) can’t be a charity.

Check that being a charity won’t stop you doing things you want to do. For example:

Alternatives to setting up a new charity

There are over 160,000 registered charities in England and Wales and many more unregistered charities. Setting up and running a charity takes a lot of work. Alternatively, you could:

Work with an existing charity

You could contact an existing charity to see if it might be possible for you to work with it.

Use these services to find trustee and other volunteering opportunities in your area:

Set up a named fund instead of a charity

Some charities will let you set up a named fund if you want to raise money for a one-off event such as a disaster.

This saves the time and effort of setting up and running a charity then closing it once the original need has been met. Depending on the charity, you can say where you want the money to go.

Set up a non-charitable social enterprise

A ‘social enterprise’ is a business that has social, environmental or community-based objectives and can have non-charitable purposes.

Set up a social enterprise

Step 2: decide on your charity’s purpose

If you choose to set up a charity, start by deciding what its purpose will be. Your charity’s ‘purpose’ is what it is set up to achieve - the reason it exists.

Your charity can have more than one purpose but it can’t have any purposes that aren’t charitable.

Your charity’s purposes are important because:

  • they help the commission decide if your organisation is a charity and HM Revenue and Customs decide if it qualifies for tax relief
  • they explain to the people who run, support or benefit from your charity what it does and who it helps
  • your charity can only do things that carry out its purposes

You must run your charity in a way that’s consistent with and supports its purposes.

Charitable purposes: the law

To be a charity in England and Wales, everything it is set up to achieve must be charitable. This means each of its purposes must:

Be aware that not everything that benefits the community or is a good cause is charitable.

Putting your charity’s purpose into words

Your charity’s purpose should say:

  • what the outcomes of its work will be
  • where these outcomes will happen
  • how it will achieve these outcomes
  • who will benefit from these outcomes

For example:

“For the public benefit, the relief and assistance of people in need (what) in any part of the world (where) who are the victims of war or natural disaster or catastrophe (who) in particular by supplying them with medical aid (how)”

List things the trustees can do to help the charity carry out its purposes (‘powers’) separately - fundraising collections, for example.

For more information, read How to write charitable purposes.

Step 3: choose a charity structure

Once you’ve decided on your charity’s purpose, you need to decide what organisational structure it will have.

There are four main types of charity structure:

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

It’s important you choose the right structure for your charity that fits with how your charity will operate. For more information, read Charity types: how to choose a structure (CC22a).

Step 4: write a governing document

Your charity’s governing document is the legal document that creates the charity and says how it should be run by setting out:

  • its name
  • its charitable purposes (‘objects’)
  • what it can do to carry out its purposes (‘powers’), such as borrowing money
  • who runs it (‘trustees’) and who can be a member (if appropriate)
  • how meetings will be held
  • how many trustees to appoint and how
  • any rules about paying trustees, investments and holding land
  • whether the trustees can change the governing document, including its charitable objects (‘amendment provisions’)
  • how to close the charity (‘dissolution provisions’)

For more information on writing, using and changing governing documents, read: How to write your governing document (CC22b).

Step 5: choose a name

Your charity’s name is important. It’s your brand; what people will remember when they are deciding to make a donation or looking to volunteer.

As trustees, you are responsible for choosing the name for your charity. If you register your charity with a name that’s misleading or already used by another charity, the commission can make you change it. Your charity will be responsible for any costs involved.

For more information, read: How to choose a charity name.

Step 6: find trustees

Charity trustees are the people who serve on the governing body of a charity. They may be known as trustees, directors, board members, governors or committee members.

Your charity’s trustees are the people who will make decisions about how to run the charity once it is set up. They are responsible for the general control and management of the administration of a charity.

As a trustee, you must run your charity with as much care as you would manage your own affairs. That means making sure it’s solvent, well-run and meets the needs for which it is set up.

Recruit enough trustees to get the skills and experience you need. Your charity’s governing document should say how many trustees to appoint. The commission recommends a minimum of three unconnected unrelated trustees with a good range of skills.

For example, people who:

  • have specialist skills like fundraising or finance
  • have community contacts which might help attract volunteers
  • understand or reflect the needs of the people your charity helps

For more information on trustee recruitment, read Trustee board: people and skills.

Step 7: fund your charity’s work

Start raising money for your charity once it’s set up.

The funds you raise for your charity must be held safely and properly accounted for.

Even a small charity needs a bank account. Lots of banks offer ‘treasurer’ or ‘community’ accounts – these are suitable for small, unregistered charities.

Unless your charity is a specific type of charity that doesn’t have to register, you must apply to register your charity with the commission once it has an income over £5,000. If your charity is a charitable incorporated organisation (CIO) you must apply to register it whatever its income.

Guidance on how to raise funds for your charity