How to set up a charity: A step-by-step guide

Indeed, 9,008 applications were submitted to the Charity Commission to register a charity during the year 2023-24. Comparable to setting up a business, there are several steps you will need to follow to operate within charity law. If you think you can meet the requirements that are necessary to set up a charity, we’ve prepared a step-by-step guide to help you navigate the legislation and requirements.

1. Find trustees

You will usually need a minimum of three trustees for your charity, and they must all clearly understand the duties expected from them. The responsibilities assigned to a trustee are demanding, and sometimes challenging, so you must take the time to ensure that your trustee can govern the charity and is prepared for the financial pressures that are often faced. Research by gov.uk uncovered that eight in ten trustees see their role as being the important decision-makers within charities, so it’s essential the trustees you choose can evaluate and decision-make for the charity.

To discover detailed information about the processes surrounding recruiting the perfect trustees for you, look at our dedicated article, here.

2. Ensure there are 'charitable purposes for the public benefit'

Before you set up your charity, you need to consult the public benefit guidance, which means you must make sure its purpose is for the public benefit, and as a trustee, you must always carry out your charity’s purpose for the public benefit. It is vital that the actions of your charity reflect outcomes that are beneficial to the public in general, which may include helping with education, health, relieving poverty, animal welfare and human rights – among many others causes. To further assist you with this step, you can read up on the Charity Commission guidance.

If your goal is to conduct both charitable and non-charitable work (i.e. a revenue-generating business), you will need to look at starting a social enterprise instead, such as a Community Interest Company.

3. Name your charity

You will need to decide on an appropriate name for your charity; one that no one else is using, which you can check by searching the Charity Register. Your chosen name should reflect what your charity does, not use offensive words and must not be misleading (for example, suggesting your charity does something it doesn't). You may use abbreviations and the word 'charity' within your name, but you will need approval from the Charity Commission if you are using the word 'charity' when you register a company name with Companies House. There are groups of words which you must obtain permission to use in your name, for example, the name of a famous person or character, the name of a famous or copyrighted work, trademarks and royal words.

For guidance, the top 20 charities discovered by YouGov includes examples of names which follow the outlined advice above, including Alzheimer’s Research UK, Alzheimer’s Society and Alzheimer’s Association. As shown, each name makes the charity’s purpose clear, includes enough differentiation from each other, and does not include any words which could potentially mislead or offend.

4. Choose a structure

There are four main structures when it comes to your charity: Charitable Company, Charitable Incorporated Organisation (CIO), Charitable Trust and Unincorporated Charitable Association. To explain simply, the type of structure you choose will reflect whether you would like your charity to have a corporate structure or a wider membership. The chosen structure will also influence factors such as who is running the charity, how the charity is run and what the charity can do.

The gov.uk site provides an in-depth definition for each structure; however, we have provided a summary of each structure below to help with your preliminary choice:

• Charity Incorporated Organisation: These are solely regulated by the Charities Commission. A CIO can enter contracts, employ staff and own land.
• Charitable Company: This is a private limited company and corporate body, which means it can own assets, properties and enter contracts. A charitable company must register with both Companies House and the Charities Commission.
• Unincorporated Association: Recognised as the simplest way to run a charity, you do not have to register unless your charity is raising more than £5,000 per year. The charity is not able to own any property or employ staff under its name.
• Trust: A charitable trust is the ideal option if your charity isn’t likely to employ many people, or if it doesn’t require a corporate structure or wider membership. If the charity’s income reaches £5,000 then it must be registered with the Charities Commission.

5. Create a 'governing document'

Essentially, the governing document is a rulebook/guideline about how your charity is run; however, the contents will vary depending on the charity’s structure. Your governing document should include your charity’s purposes, trustees, and rules about funds relating to trustees, such as expenses and payments. In terms of processes, the documents should detail how the charity is run, for example, how meetings are held and how trustees are appointed.

When the governing document is finalised, the trustees must meet to sign it. It’s essential that, as a trustee, you keep a copy to refer to when making decisions and to consult in the overall running of the charity. As of July 2024, this has been increasingly supported by the Charity Commission who updated their guidance to further emphasise the importance of complying with any given charity’s governing document when meetings are held.

6. Register

Whether you register with the Charity Commission or not will depend on your charity's predicted levels of income. If you are based in England or Wales and your charity's income is over £5,000, or you are a CIO, you will have to register.

According to How charities work, there are about 166,000 charities currently registered in the UK. The registration process involves completing various Charity Commission forms and undergoing careful inspection by the Registration Team. You will need to clarify your charity’s charitable purposes and illustrate how you will run your charity for the public benefit, alongside proof of the charity’s income. The decision on your application will usually take around 40-45 days.

7. Pick your insurance

Finally, you will need to consider and make sure the correct insurance is in place for your charity; this can help to avoid any hefty claims pay outs should something go wrong. Naturally, you may need to consider securing Property Insurance to cover any premises you own or rent on behalf of the charity. On the less obvious side, there are several other insurance policies that you may require. For example, if it is likely that you will be holding fundraising events, Public Liability Insurance could provide essential cover to protect you from claims made by the public for injury or damage to their property. To help you prepare your charity event as safely as possible, look at our top tips.

Should you employ anyone, even on a voluntary basis, you must also hold Employer's Liability Insurance. It covers against a range of scenarios, for example, if your employee is injured, or suffers illness, which arises from their employment at your charity. In fact, failure to secure employer’s liability insurance is against the law and you could be fined up to £2,500 for every day you are uninsured.

At Markel Direct, we have over 25 years' experience insuring charities of all ages – from new to long established – against a wide range of risks, with cover available from £3 a month*. To explore more surrounding insurance policies and cover that we offer for charities, such as Trustee Indemnity Insurance and Professional Indemnity Insurance, explore our Charity Insurance overview.

To discover more, get a quote now at markeluk.com or call us on 0800 640 6604 to speak to a charity insurance expert.

*Price based on a small charity requiring £500,000 of trustees’ liability and charity professional indemnity insurance.