In the world of charities, we often focus on lasting impact, momentous milestones, financial planning, cybersecurity and resilience against geopolitical and economic challenges. But there’s one crucial conversation that often gets overlooked: the legal structure of your charity. This fundamental aspect plays a pivotal role in good governance.
The four main types of charity structures
Charitable Incorporated Organisation (CIO)
Governing document: CIO Foundation or CIO Association constitutions
Charitable Company (Limited by Guarantee)
Governing document: Articles of Association
Unincorporated Association
Governing document: Constitution
Trust
Governing document: Trust deed
The corporate structure
Before diving in, consider the size of your charity, your operations and whether you want wider membership.
- Incorporated charities: Treated as a legal person, they can hold property, employ people, and enter into contracts in their own right. This generally limits liability, meaning trustees aren’t personally liable for the charity’s actions. However, CIOs and charitable companies (limited by guarantee) are non-profit distributing structures. They can only use their assets for charitable purposes and must operate in the charity’s best interest. Note that a company must first be incorporated with Companies House before applying to become a charity. Both the Companies Act and Charities Act regulations and reporting requirements will apply.
- Unincorporated charities: These cannot enter into contracts or control some investments in their own name. They require two or more trustees, a corporate custodian trustee, or the charity’s land holding service to ‘hold’ any land on the charity’s behalf. Trustees are also personally liable for the charity’s actions.
For more information on corporate structure and membership considerations, see Charity types: how to choose a structure (CC22a) - GOV.UK.
Charities without a corporate structure: Unincorporated Association or Trust?
- Unincorporated association: Ideal if you want wider membership but the charity will remain relatively small in terms of assets.
- Trust: Suitable for grant-making charities that prefer not to deal with a corporate structure or wide membership and have only a small number of staff. Simply specify the sum of money, land or other assets in the trust deed, no matter the amount, and you can register with the Charities Commission.
Choosing the right structure is crucial for your charity’s success and governance. Each structure has its unique advantages and limitations, tailored to different sizes, purposes and operational needs. A well-chosen structure not only supports smooth operations but also ensures compliance, accountability and the trust of your stakeholders. So, take the time to assess your options, consult with experts if needed, and make an informed decision. After all, good governance starts with asking the right questions—so, what’s your structure?
The next step
If you would like to discuss any of the issues raised in this blog, please contact your usual UHY charity adviser or get in touch using the contact form below.
