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Many people want to give something back when starting a business and many do this by setting up a charity. Setting up a charity (not for profit in the USA) in the United Kingdom can be complex but there are many benefits to doing so. If you follow the procedures laid down by the Charity Commission, then the process can be be straightforward. Before you even think about setting up a charity, you need to ask yourself a few questions.
What is a charity? According to the Charity Commission, a charity is an organisation whose purposes are “exclusively charitable” This means that it cannot have some activities that are charitable and some that are not. It has to be established for the benefit of the public i.e. it cannot be just for an exclusive group of people. This can be done through:
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the relief of financial hardship
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the advancement of education
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the advancement of religion
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certain other purposes for the benefit of the community
So if what you plan to do falls under one of these categories, then you will be able to legally register the charity. However even with all the best intentions, strong visions and excellent ideas, you must answer some important questions, some of which are listed below.
Do you really need to set up a charity?
I know that this sounds harsh, but there are so many charities (190,000 registered in England and Wales alone) covering a multitude of areas from cancer to famine relief and beyond. So setting up a charity may not be the best way to proceed and may not even be legally possible. Some of the instances where setting up a charity may not be possible include responding to an international disaster (instead donate money to a charity that covers this area), commemorating someone who has either passed away or had a rare disease (instead link a trust fund for an existing charity that deals with this area) and having political aims. Now for the latter, charities can help carry out political/campaigning activities to “help achieve a charitable purpose“ but the difference here is that a charity CANNOT have political aims. If you wish to do so, then you will have to seek an alternative such as setting up a voluntary, non-charitable group instead.
Are there charities with the same goals/activities as yours?
There are so many charities and limited funding that any new charities already face a problem. This is because funding bodies are more likely to give money to established charities with an excellent track records. Therefore many potential donors believe that it may be better for charities to come together and pool resources so that whatever resources can stretch further.
If you still want to set up your charity, there are some guidelines and regulations that have to be followed. First and foremost, you have to register with the Charity Commission. Their role is as regulator and registrar of charities in England and Wales. Their principle aim is to increase the efficiency of each charity as well as try and increase public trust in what they are doing. Organisations have a legal duty to register with the Charities Commission if they:
Are located in England and/or Wales for exclusively charitable purposes
Have an income which exceeds 5000 per annum;
AND EITHER
have been incorporated in England and Wales;
or the majority of charity trustees live in England and Wales;
and/or the majority of assets are in England and Wales.
In addition to this, you must have a governing document. This formally sets out and sets up the charity. Examples and methods of how to do this can be found here. Furthermore, you will also need a Trustee Declaration form, a completed application form and evidence of income. When these have been received by the Charity Commission have received this then, they will acknowledge it and an initial response should be received in about 2 weeks. The whole process takes on average about 6-8 weeks.
Being successfully registered as a charity has many benefits and problems so these must be considered to give a balanced view.
Advantages - People like to give their time and energy to a charitable cause
Charities get a wide variety of tax breaks (please refer to http://www.hmrc.gov.uk/charities/tax/index.htm)
Many companies will offer discounted and/or free support to charities
Disadvantages - The trustees of a charity cannot be paid or gain financially
You cannot have any political allegiances and/or work for a political party
The charity must be careful to operate strictly with the terms of their governing document
So there you have it! Setting up a charity can be difficult but the benefits to yourself and to society are huge. If you feel passionate about it, then go for it!
Take care and God Bless…
