Legal Structure: Which One is Right for Your Charity?

Ever wondered why some local groups call themselves a Trust while others are a CIO? It isn’t just a naming quirk – the legal structure decides how you raise money, protect assets, and run everyday decisions. In this guide we break down the most common forms, point out the biggest pros and cons, and give you a quick checklist so you can pick the one that fits your goals.

Common Legal Forms for Charities

Charitable Trust – This is the oldest model. You set up a trust deed, name trustees, and the trust holds assets for a charitable purpose. Trusts can be revocable (you can change the terms later) or irrevocable (once set, you can’t backtrack). In the UK, a charitable trust is regulated by the Charity Commission and must file annual returns. The main upside is low administrative cost, but you give up a lot of flexibility – especially if you need to bring in new trustees or alter the purpose.

Charitable Incorporated Organisation (CIO) – Think of a CIO as a hybrid between a company and a trust. It’s a legal entity in its own right, so it can own property, sign contracts, and limit trustees’ personal liability. The downside? The Charity Commission’s oversight can feel heavy, and you may face extra reporting requirements. Recent articles point out hidden drawbacks like slower decision‑making and tighter rules on fundraising.

Company Limited by Guarantee (CLG) – This is a commercial‑style company where members guarantee a small amount (usually £1) if the organisation winds up. It offers the strongest protection for volunteers and staff, but you need to register with Companies House and file both company and charity accounts. It works well for larger groups that run paid staff or own significant assets.

Unincorporated Association – The simplest set‑up: a group of people agreeing to work together for a charitable aim. No legal personality means you can’t own property or open a bank account in the group’s name. It’s cheap to run, but trustees can be personally liable for debts.

How to Pick the Right Structure

Start with your size and activity level. If you’re a small volunteer club with a modest budget, an unincorporated association or charitable trust may be enough. Once you start hiring staff, own a building, or expect big donations, a CIO or CLG gives you the legal shield you need.

Next, think about governance. Trusts rely heavily on trustees to make decisions, while a CIO or CLG usually has a board and may need to appoint directors. If you want a clear hierarchy and formal meetings, a company structure suits you.

Don’t forget tax and fundraising rules. CIOs can sometimes face stricter limitations on commercial activities, which can affect income‑generating projects. Trusts are often freer to run small charity shops but may hit limits on large‑scale fundraising events.

Lastly, consider future flexibility. If you anticipate changing your charitable purpose, merging with another group, or expanding nationally, a CIO or CLG makes those moves smoother. A revocable charitable trust can also adapt, but once you switch to an irrevocable trust you lock in the purpose.

Quick checklist:

• How much money will you handle? (More than £10k → CIO or CLG)
• Will you own property or hire staff? (Yes → CIO or CLG)
• Do you need limited liability for trustees? (Yes → CIO/CLG)
• Do you plan big fundraising events? (Check CIO restrictions)
• Is future change likely? (Consider revocable trust or CIO)

Pick the form that matches your current reality and long‑term vision. You can always re‑register later, but starting with the right legal structure saves headaches, extra fees, and legal surprises down the road.

Got more questions? Talk to a charity solicitor or drop by the local Charity Commission office. A short chat can clarify which model fits your community project best, and you’ll be set to focus on what matters most – making a difference.