There are many thousands of charities in the world. In the UK alone, there were more than 170,000 registered with the Charities Commission in March 2024. Estimates suggest that there could be many more that are not required to register. In the US, the figure rises to more than 1.8 million recognised charitable organisations.

Why, then, would anyone set up another charity? There are many possible answers to this. There may be no charity with precisely your aims. You may want to focus on a very specific area and feel that more general charities cover but overlook this area. You may want to be in control of your own fundraising. Whatever the reason, around 5,000 new charities are registered in the UK each year, although similar numbers also close each year.

This page explains what you need to know and do to set up a charity. It covers broad principles, rather than specific information for particular geographies or jurisdictions.

What is a Charity?

A charity, or charitable organisation, is broadly defined as an organisation that is set up to provide help or raise money for people in need.

However, there are also specific legal definitions that apply to charities, set out by governments (see box). These therefore vary between jurisdictions. However, broadly, we can say that all charities are non-profit organisations and are established to ‘do good’ in some way.

Governments establish definitions because having charitable status provides significant benefits. For example, charities are generally exempt from paying taxes on their income, or on what they buy. There could therefore be considerable incentive to declare that you were running a charity instead of a business.

Generally, charities are required to be non-profit organisations: that is, they are not permitted to make a profit for the benefit of those running them. Instead, all their income must go towards the charitable purposes for which they were established—which may include employing staff to deliver services or administer the charity.

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What To Consider When Setting Up a Charity or Non-Profit

There are many issues to consider before setting up a charity or non-profit organisation.

The precise legal requirements will vary by jurisdiction, but there will be similarities. This page concentrates on the broad principles and similarities, and provides information about where to find jurisdiction-specific information.

The issues to consider include:

1. The purpose of your organisation

What will your organisation do? That is, what is its mission or purpose?

There are several reasons why this is important.

First, you need to ensure that it fits within the legal definition of a charity. Not all non-profits are charities—and nor should they be. There are other legal structures that may be more suitable, such as Community Interest Companies in the UK. Charities are also not allowed to carry out certain activities, such as campaigning for a change of government, so you need to check that being a charity will not constrain your activities too much.

This purpose is also what your organisation’s board or trustees will look at to ensure that they are doing their jobs, and that all the organisation’s activities are legitimate. It therefore needs to be carefully defined.

Second, you also need to ensure that there is a need for your organisation.

You want to be clear that there is a real need for your organisation to exist. That usually means that no other charity is doing the same thing, either locally or nationally. Once you have defined your organisation’s purpose, you therefore need to do some research into other local and national non-profit organisations to make sure that your purpose is unique. If there is another charity doing something very similar, it may be better to work with them, rather than set up a new organisation. This will avoid competing for resources.

2. The governance of your organisation

The governance is the structure and management of your organisation, including who is responsible and accountable for its activities.

In most jurisdictions, there are several different options for structure. Which is most suitable will depend on your planned activities. It is therefore worth reading government guidance in your jurisdiction to check this.

You also need to decide who is going to be accountable and responsible for your charity. In the UK, these people are called trustees, and you are expected to have at least three. In the US, non-profit organisations need a board of directors. Deciding on trustees or directors is an important function and should not simply be a matter of asking friends or family members.

3. A name for your organisation

Your organisation also needs a name. It is probably helpful if this reflects its purpose in some way, although this is not essential.

There are often rules about what a charity can be called, and you should check these before you start thinking. For example, in the UK:

• You cannot use a name that is too similar to that of an existing charity. You will therefore need to check the charities’ register for other charities;

• You cannot use any words such as trademarks (unless you are entitled to use them, in which case you will need evidence of that);

• You are generally not allowed to use any words or terms that might be considered offensive; and

• Your charity’s name cannot be misleading, or suggest that it does something that is not included in its purpose.

4. Documentation and registration for your organisation

To obtain and keep charitable status for your organisation, you will generally need to prepare and submit documentation and evidence to your country’s government.

In the US, for example, you need to complete particular forms to file for tax-exempt status, and then submit annual returns to maintain that status.

In the UK, you need a ‘governing document’ that explains how the organisation will be run and managed. This needs to include the name, structure and purpose. You also need to be able to show that you meet the ‘public benefit’ requirement.

It is therefore important that you know what documentation you need to prepare when setting up a charity. It is also vital to know what records and returns will be required on an ongoing basis.

You will also need to know whether you are required to register as a charity. In the UK, for example, only charities with an annual income of more than £5000 are required to register with the Charity Commission. However, charities of any size may choose to register with HM Revenue and Customs (HMRC) to be able to claim back tax on Gift Aid donations. You do not need to be registered with the Charity Commission to apply to HMRC. Charities of all sizes are expected to keep adequate records and accounts.

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A Final Thought

Setting up a charity is not an easy process. However, it pales into insignificance beside the job of actually running one, including fundraising, record-keeping and distributing funds, not to mention providing services. It is therefore very important that you are clear that you both want and need to establish a charity before you go through any kind of formal process.

Around 5000 new charities are established each year in the UK—and in recent years, a similar number have been closed down. Most of these are very small operations, known as micro-charities.

Generally speaking, rather than setting up a new charity, the best advice is to find an existing charity that is already doing something similar, and team up with them. This will give you the best chance of delivering against your aims.

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