Operational charities

An operational charity is one which carries out charitable activities itself, whether that is helping disadvantaged people or animals, raising money from others for a cause that has inspired them, or working in some other way to improve society.

If you wish to set up an operational charity, then there are a number of points to consider.

First, there are over 150,000 registered charities in England and Wales. It is a tribute to the generosity of past and present generations that this is the case. It also means that it is likely that there is already a charity that has the same aims as you. For example, there are 580 charities raising money for cancer research and support in the UK. They all compete for funds, have to pay set-up and administration costs, and have to find dedicated trustees. Some raise relatively small sums which, in any case, have to be pooled with those of others to fund an effective programme of research or work. New charities have to learn about how the charity world works and set up the networks that encourage effective co-operation. This does not mean that they should all merge. In many cases, there will be a different and unique focus, or the charity will be associated with a particular person whose name will make a difference.

But there are questions that everyone who is thinking of setting up an operational charity should ask themselves:

• Is there an existing charity operating in the same field?

• Is it well established and regarded, with an effective programme of work and good trustees?

• Would it be willing to carry out the work I have in mind, perhaps creating and monitoring a specific project my funding could be directed to?

You may be able to obtain the answers to these questions from the Charity Commission for England and Wales or the Office of the Scottish Charity Regulator. You should also talk to existing charities that operate in the same area of work you are considering.

You should also think about the resources needed to run a charity. Other questions include the following:

• How would I see the charity that I am thinking of creating working in the long term?

• Do I have the time and energy needed to run a charity?

• Am I confident I could raise enough money to make sure that the cause I want to support will receive the level of funding it deserves?

• Will I be able to attract trustees (and staff) of the right quality, commitment and range of expertise?

If you are satisfied that the answers to these questions show that you should go ahead with setting up a new charity, then you need to decide the best legal form to use. The Government is looking at new structures for charities that may be more appropriate for the 21st century, but for the time being the important question is whether you are likely to have liabilities. One way of looking it is to consider the following questions:

• Am I going to employ staff?

• Am I likely to invest in assets (equipment, machinery, premises and vehicles)?

• Am I going to become involved in fundraising?

• Am I going to have other liabilities?

If you answer 'Yes' to any of these questions, you should limit your liability by setting up as a company limited by guarantee or other limited liability vehicle. There is also a new limited liability vehicle, the 'Community Interest Company' (CIC), as of July 2005.

You can obtain a model document ('Model memorandum and articles of association for a charitable company') number GD1 from the Charity Commission, who also have a helpful leaflet CC21 'Registering as a charity'.

The Charity Law Association has also developed a model form of document for setting up a company limited by guarantee. The CLA can also advise you on lawyers with expertise in this area who may be able to help.

If you do not currently have access to someone with relevant professional experience, we would, in any case, advise you to consult an experienced lawyer or accountant, who can go through the process with you.