Setting up a charity

Many people are looking at setting up a charity in the wake of the social impact the pandemic has had on their communities. Others feel it is the right time to ‘give something back’ now we are starting to rebuild the country and are wanting to ‘build back better.’

Key issues

Whatever the motivation, there is a lot to be thought through at the outset of setting up a charity. The three main things are:

Deciding and registering the right legal framework
Creating a board
Opening a bank account.

To make matters more confusing, all three are inter-dependant. For instance, you can’t open a bank account in the name of the organisation until it is registered (which can take months). You can’t register the charity without a board as you need board members to open the bank account. And you can’t find the right board until you have decided the mission and vision of the organisations.

A process which is often successful is to find a small group of like-minded people who can form a steering group and who are willing to become founding board members at the right time. You might consider having people with a legal background, financial ability and someone with the knowledge of the issue you are addressing.

Decisions to be made by the Steering Group

The vision and mission of the organisation – what you are trying to achieve and why
Which legal form to use. Depending on what you want to achieve, you might choose to be a Registered Charity, Charitable Incorporated Organisation, Community Interest Company or Company Limited by Guarantee. Sometime organisations choose a dual route and can be, for instance, a Registered Charity and a Company Limited by Guarantee. It is worth knowing that some funders are wary of funding some legal frameworks. This varies from funder to funder and needs research at the outset so that you know which funders might support you in the future
Depending on your chosen legal form, there are difference compliance issues and processes for meetings etc. These can be found as template documents on the websites of the regulatory bodies
Who will be the first chair, treasurer and secretary
Which bank to use. There are some specialist banks and all mainstream banks have a charity section. All the offers vary, so you will need to decide which bank account will help you achieve your goals. It is best to have three signatories so you can use any two of the three when you make payments. Making sure the three people are not related (or in a relationship) will provide confidence to funders and help to ensure financial probity.

All of this may sound daunting, but it is important to do this well at this stage. This will prevent problems in the future, or make them easier to address when they arise. The good news is that once you have these strong foundations in place, you can build the organisation that supports you in achieving your impact – that’s the fun bit!

Some helpful links

https://www.gov.uk/government/publications/community-interest-companies-business-activities

https://www.gov.uk/guidance/charity-commission-guidance

https://www.gov.uk/topic/company-registration-filing/starting-company

https://charitybank.org/ethical-bank

https://www.business.natwest.com/business/bank-accounts/community-bank-account.html

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Key issues

Whatever the motivation, there is a lot to be thought through at the outset of setting up a charity. The three main things are:

Deciding and registering the right legal framework
Creating a board
Opening a bank account.

Decisions to be made by the Steering Group

The vision and mission of the organisation – what you are trying to achieve and why
Which legal form to use. Depending on what you want to achieve, you might choose to be a Registered Charity, Charitable Incorporated Organisation, Community Interest Company or Company Limited by Guarantee. Sometime organisations choose a dual route and can be, for instance, a Registered Charity and a Company Limited by Guarantee. It is worth knowing that some funders are wary of funding some legal frameworks. This varies from funder to funder and needs research at the outset so that you know which funders might support you in the future
Depending on your chosen legal form, there are difference compliance issues and processes for meetings etc. These can be found as template documents on the websites of the regulatory bodies
Who will be the first chair, treasurer and secretary
Which bank to use. There are some specialist banks and all mainstream banks have a charity section. All the offers vary, so you will need to decide which bank account will help you achieve your goals. It is best to have three signatories so you can use any two of the three when you make payments. Making sure the three people are not related (or in a relationship) will provide confidence to funders and help to ensure financial probity.