Legal structures for charities and community groups

1. Why legal structures are important

The legal structure of your charity or community group will affect how your charity runs and what it can and can’t do.

When considering setting up a charity or voluntary, community or social enterprise (VCSE) organisation, you need to consider whether you and your colleagues want to earn an income from the organisation’s activities, or whether you want to volunteer your services.

If you want to set up an organisation where you will volunteer your time, then continue reading this guide.

If you want to set up an organisation whereby you and your colleagues will earn an income from the activities of the organisation, then we recommend you read our guides on social enterprises.

2. The difference between a charity and a social enterprise

In general, charities often fund their good work through donations and fundraising whereas social enterprises often sell products or services in order to re-invest their profits.

Some charities do fund their work through a type of social enterprise activity, however their social enterprise activity must must not deviate from their charitable purposes and must comply with charity legislation. A charity’s activities should be to further their purpose, which generates public benefit. Any private benefit that arises must be necessary and incidental to the delivery of those activities.

If you want to set up an organisation whereby you and your colleagues will volunteer your time, then a type of community group or charity would be the most appropriate.

If you want to tackle social issues whilst earning an income as the owner or shareholder of a VCSE organisation, then primarily the organisation will be classed as a social enterprise.

3. Unincorporated Association

An unincorporated association is the most basic form of community group. It is not registered with the Charity Commission and it does not employ staff or own premises. As an unincorporated body, the committee members are personally liable for what it does.

4. Registered Charity

A registered charity is a charity that has income of at least £5,000 per year. It is unincorporated. The trustees are personally liable for what the charity does.

In order to establish a registered charity, you must register with the Charity Commission, preferably using the Charity Commission’s model constitution for an unincorporated charity.

5. Community Amateur Sports Clubs (CASC)

The Community Amateur Sports Club (CASC) scheme provides an additional legal structure option for sports clubs. It requires less regulation than if a sports club registers as a charity.