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Tuesday, 18 January 2011

Types of charity

If you are setting up a new charity you will need to decide on what form it will take before you apply. Find out what the different types are and where to get help deciding on the right one for your organisation.

Main types of charities

Charities can be:

  • private limited liability companies also known as incorporated associations
  • unincorporated associations
  • trusts

There are other forms a charity can take without being registered. To find out more read ‘Alternatives to setting up a registered charity’.

Private limited liability companies

You may want to create a limited liability company if the organisation is likely to:

  • be large
  • employ people
  • enter into contracts to deliver or use services
  • own land or property

An example of a charity that is a limited company might be a local arts charity that promotes the culture of a particular group in the community by organising cultural events. They might need to be a limited company in order to hire a lighting company for an event.

Unincorporated associations

You may want to use this structure for your charity if:

  • the organisation has members whose views need to be reflected in the running of the organisation
  • the members of the organisation elect trustees for a fixed period of time
  • members are involved with the running of the organisation
  • the organisation does not have very large assets (ie property, land or investments) or a high turnover
  • the organisation will not need to hire staff or enter into any other contracts

Examples of an unincorporated association might be a residents association that meets to improve the local area.

Trusts

Creating a trust may be advisable if:

  • the organisation will be run by a small number of people and its administration will be simple
  • trustees will be chosen by existing trustees and there is no time limit on how long they will be in office
  • the organisation is not likely to need to rely on members for its administration
  • the organisation’s sole activity is giving grants
  • land and buildings are to be held on trust for permanent use of the charity
  • there is to be a restriction on the spending of the capital

This type of charity might be set up by a group wishing to distribute the funds left in a will for a particular purpose.

Getting help and advice

Deciding on the best structure for your organisation can be complicated so you may want to take professional advice. Your local council may have details of places you can get advice.

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