How to start a charity or non-profit business
Most guides on becoming self-employed focus on the choice between operating as a sole trader or limited company. But what if you’re aiming to build an organisation to help people and communities, benefit the environment, or support other worthwhile causes?
Research relevant existing charities and organisations
It’s important to know whether any existing charities and organisations are already working on the same issues. In many cases, it may be more effective to work with them, rather than setting up an alternative to compete for the same resources and funding.
Or it might help you focus on a different area of the problem you want to tackle. For example, Diabetes UK helps people with both type 1 and type 2 of the disease with support, treatment, and care. But the Juvenile Diabetes Research Fund (JDRF), is focused on funding research to cure, treat, and prevent type 1 diabetes. So, while they overlap, there’s also a clear distinction between the two charities, which means I support both rather than choosing between them.
And if you find that there’s currently a gap that can be solved by your efforts, the organisations you’ve researched will be a useful list of contacts and potential partners for advice, support and to potentially work together in the future.
It’s also important to ensure that the name of your charity or non-profit isn’t too similar to that of an existing organisation, which would stop you registering it with either the Charity Commission or Companies House.
You can search for registered charities via the Charity Commission, along with general internet searches to check for unregistered charities, non-profits, and social enterprises. It’s also worth repeating the exercise each year as part of reviewing your business plan and activity, to see if any new organisations have launched in the 12 months since you last checked.
Legal requirements and restrictions for charities
Any charity will need both charitable purposes and a governing document (which creates the charity and says how it should be run).
There are also specific laws and guidance applicable to running a charity. For example, charities can campaign, but can’t have a political purpose or undertake political activity that isn’t relevant to their charitable purposes.
Trustees and founders, or anyone connected to them, can’t receive a personal benefit unless it’s classed as ‘incidental’. And decisions need to be made in accordance with the principles laid out by the Charity Commission for England and Wales (or the Office of the Scottish Charity Regulator and The Charity Commission for Northern Irelandwhere applicable).
It’s particularly important to understand the rules around charity accounts, financial reporting and tax, given the range of relief available on most types of income. And the ability to claim back tax on bank interest and donations (known as Gift Aid).
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