Non-profit Legal Structures
We are committed to doing our bit for communities and the planet through our Corporate Social Responsibility (CSR). We aim to minimise the environmental impact of our business, support our local community and contribute to good causes – with a particular focus on charities supporting young people, the arts, people living with dementia, and international humanitarian relief and development.
Which non-profit legal structure works best?
CIC, Company Limited by Guarantee, CIO, Registered Charity, Company Limited by Shares, Co-operative Society and Community Benefit Society – these are just a few of the bewildering range of legal structures available to non-profits.
So, what do they mean? And which is right for your social enterprise or charity?
Getting it right from the start is essential. Changing structure later is often complex, costly, and sometimes impossible.
Expert guidance on choosing your structure
In partnership with the British Library Business and IP Centre, our Director, Julian Lomas presented a free webinar on Choosing the Right Legal Structure for a Social Enterprise.
A qualified expert in charity and social enterprise governance, Julian has over 15 years’ experience advising clients on structure, compliance, and organisational form.
In this one-hour session, Julian demystifies the choices available by:
Explaining the key features of the main options.
Outlining the pros and cons of each.
Clarifying how structures can (and cannot) be changed.
You can watch the recording here and download the slides here. The presentation lasts around 30 minutes, followed by a 30-minute Q&A.
We also explore this topic further in our blog section.
Charity legal structures
The most common question we receive is: “What are the legal structure options available for charities?”
There are four main legal forms for charities:
Trust
Unincorporated Association
Charitable Incorporated Organisation (CIO)
Company Limited by Guarantee (CLG)
The sections below outline the main advantages and disadvantages of each structure to help you decide which form is most suitable for your charity.
Trustees of existing charities should also review periodically whether their current governance arrangement remains fit for purpose, including the current structure. Converting between forms is sometimes possible – for example, from an unincorporated form (Trust or Unincorporated Association) to an incorporated form (CIO or CLG) to provide trustees with limited liability – but it is not always the best option. It usually involves setting up a new charity, transferring assets, and closing the old charity. In many cases, there are limited advantages in changing between incorporated forms.
If you need further advice on establishing or reviewing your charity’s structure, or any other aspect of charity governance, including collaborations, consortiums or mergers, please contact us for guidance.
Disclaimer
Choosing or changing the legal form of a charity can be complicated and decisions should always rest on your specific requirements and circumstances. This guidance provides general information and does not constitute formal advice (legal or otherwise) to any specific existing or proposed organisation or charity on its legal form. Bespoke advice, including legal advice where appropriate, should be obtained before proceeding.
Trust
Governing Document: Trust Deed or Will
Advantages:
Simple and inexpensive to set up.
Straightforward accounting using receipts and payments.
One regulator – the Charity Commission.
Disadvantages:
Trustees generally have no protection from liability (beyond insurance cover).
Cannot have members who have a formal role in governance.
Requires £5,000+ annual income to register as a charity.
No legal personality – contracts must be entered into by trustees.
Unincorporated Association
Governing document: Constitution
Advantages:
Simple and inexpensive to set up.
Straightforward accounting using receipts and payments.
Allows members to have a formal role in governance.
One regulator – the Charity Commission.
Disadvantages:
Trustees generally have no protection from liability (beyond insurance cover).
Requires £5,000+ annual income to register as a charity.
No legal personality – contracts must be entered into by trustees.
Charitable Incorporated Organisation (CIO)
Governing document: Constitution
Advantages:
No minimum income required to register as a charity.
Simpler accounting (if annual gross income is under £250,000) using receipts and payments.
Trustees generally have no or limited liability for the debts of the CIO.
Has its own legal personality and can hold contracts in its own right.
One regulator – the Charity Commission
Disadvantages:
Must use accruals accounting if gross annual income exceeds £250,000.
CIO exists only once registered with the Charity Commission.
No register of charges for a CIO as there is for a company, which may be important if borrowing money.
Company Limited by Guarantee (CLG)
Governing document: Articles of Association (if formed before September 2009, Memorandum and Articles of Association)
Advantages:
Trustees (Directors) have limited liability for certain liabilities.
Has its own legal personality and can enter into contracts in its own right.
Allows members to have a formal role in governance.
The Charity Commission advises that a CLG will be a better option if your charity is likely to want to issue debentures (or bonds).
Disadvantages:
Often more complex and costly to set up and operate – a CLG comes into existence when registered by Companies House but must subsequently register with the Charity Commission.
Must have over £5,000 annual income to register as a charity.
Must use accruals accounting regardless of how much income it receives.
Two regulators – the Charity Commission and Companies House.
Need expert advice?
Almond Tree Consulting has extensive experience advising on governance and structure – from setting up new charities and social enterprises to modernising existing constitutions. For guidance tailored to your organisation, email julian@almondtreeconsulting.co.uk