Starting a charity: An overview of the formation process

Starting a charity is exciting, but potentially daunting, especially if you're new to the sector. Whilst there's likely to be a desire to ‘get on with it’, it's important to get the formation process right. It will help your charity succeed and potentially avoid issues further down the line.

Step 1: Define your charitable purpose

To qualify as a charity, your organisation’s activities must be charitable in law.

Begin by clearly defining your charitable purpose. This must fall within one or more of the 13 descriptions of purposes set out in the Charities Act 2011, and includes things such as the promotion of health, relief of poverty, and advancement of education.

The charitable purpose will be set out in the governing document (see Step 3), and your charity will only be able to act to achieve this purpose. Therefore, it's important to get this right.

There’s also a requirement for the charity to provide public benefit, which means it must benefit the public or a sufficient section of it – not just a private group.

Step 2: Choose a legal structure

Charities can take several legal forms. The most common are:

• Charitable Incorporated Organisation (CIO) – This is an increasingly popular choice, offering limited liability and a single regulator (the Charity Commission). Most new charity registrations we assist with use this model.
• Charitable Company (Limited by Guarantee) – Regulated by both the Charity Commission and Companies House.
• Unincorporated Association or Trust – Simpler to set up, but trustees may be personally liable.

Choosing the right structure depends on your charity’s size, activities, and risk profile.

Step 3: Draft a governing document

Your governing document sets out how your charity will operate. It includes things like:

• Your charity’s objects (purpose) – see Step 1 above
• Trustee powers and responsibilities
• Procedures for meetings and decision-making
• Rules that govern transactions between the charity and its trustees, and individuals or organisations connected to trustees

The good news is that model documents are available, and for most charities, other than the objects, little amendment from the model is required.

Step 4: Recruit trustees

You’ll need at least three trustees to register a charity.

It’s good practice to recruit trustees with a mix of skills – finance, governance, fundraising, and lived experience of your cause.

Step 5: Apply for charity registration

If your charity’s income will be over £5,000 per year, or you’re forming a CIO, you must register with the Charity Commission. Your application will need:

• A completed online form
• Your governing document
• Details of trustees
• A clear explanation of your charitable purpose and public benefit

This step is more than filling in a simple form and will take some time.

Of particular interest to the Commission are the objects and proposed activities. They’ll be looking to make sure these are charitable and provide public benefit. If transactions between the charity and the trustees, or individuals or organisations connected with them, are anticipated, this may be another area of focus.

The Commission is likely to ask questions or seek additional information or clarification, so be prepared for a bit of back and forth. The good news, however, is that the Commission will usually offer solutions and work with you to resolve any areas of concern.

Common pitfalls to avoid

• Vague charitable objects – These can delay registration or cause future governance issues if they don’t fully cover what you intend the charity to do.
• Underestimating the time it will take – Setting up a charity isn’t quick. In particular, drafting the application takes time, and once it’s submitted, you're in the hands of the Charity Commission and their workload.

Need help?

Forming a charity is more than a simple administrative process, and spending the time to get it right pays off. Get in touch with your usual Larking Gowen contact or email enquiry@larking-gowen.co.uk to see how we can help you.

Chris Yeates