Deciding on an objective is only the first step to setting up a charity. Your charity’s aims are brought to life by the legal structure that you choose to adopt. Though there are various structures to choose from, the majority of faith charities will benefit from the Charitable Incorporated Organisation, (CIO), structure which we will discuss in a bit more detail.
Before delving further into this topic, it is important that the following questions are briefly addressed: what is a charity? And, what is a governing document?
According to legal guidelines, a charity is an organisation that is set up with exclusively charitable purposes for the ‘public benefit.’ This means that some causes that are considered charitable, such as raising money to pay for an individual’s medical care, do not fall under the definition of a ‘charity.’
It is essential that a charity has two things:
Trustees are a body of volunteers who undertake responsibilities on behalf of the charity, for further guidance click here.
- Governing document
A ‘governing document’ operates as a charities rule book, laying out a charity’s purpose or objective; how these objectives can and will be met; who runs it, and how they will be appointed, including the trustees. For further guidance on drawing up a governing document click here.
- Setting up your Charity
There are four different ways to set-up a charity, and though each one offers unique advantages and some disadvantages, most faith institutions will benefit from the CIO structure. Let’s discuss why.
The CIO setup basically combines the structure of a corporation with the benefits of a charity. It’s the recommended setup for most charities because the CIO, rather than individual trustees, are primarily responsible for financial liabilities. This makes it easier and safer to become a trustee. In addition the CIO requires you to register with just one body, the Charity Commission.
There are two ways to create a CIO. In deciding which structure to choose, the charity should consider these basic questions:
- Would your charity work better with a wide body of members who vote on major decisions?
- Would your charity work better if only the trustees made decisions?
With a wider membership: This is a good option if you want your members to have a real say in how the charity is run, who is appointed as trustees, and changes to your governing documents. It requires an ongoing commitment to run transparent, representative and timely Annual General Meetings (AGMs) and keep all your members up-to-date with the charity’s activities and finances.
Without a wider membership: A ‘foundation’ CIO. This is a good option for charities that want to be a corporate body, but only want the trustees to be the voting members. The major drawback of this model, is that volunteers outside of the trustee board may feel left out of the decision making process.
Strengthening Faith Institutions and the Charity Commission can help your faith centre choose the most suitable option. Get in touch to speak to an expert consultant.
For further guidance on charity structures, click here.