Contents
If you’re setting up as a not-for-profit but have a company structure, you can establish a not-for-profit company (or non-profit organisation) in the UK. This modern approach is increasingly popular in 2025 as organisations look to combine robust governance with a clear social mission.
So, where do you even begin?
In this article, we’ll answer the following questions about not-for-profit companies:
- What legal structures are available for not-for-profits?
- What actually is a not-for-profit company?
- Is a not-for-profit company the right legal structure to choose for your venture?
- How does a not-for-profit company differ from a company limited by guarantee?
Choosing The Right Legal Structure For Your Not-For-Profit
As with any organisation, you want to ensure that you set up your not-for-profit correctly from the outset. In 2025, with evolving regulatory frameworks, the importance of selecting the right legal structure cannot be overstated. It’s also wise to understand why business structure matters when planning your venture.
There are various not-for-profit structures available, and the one you choose will depend on the nature of your organisation. For example, if you’re setting up a traditional NFP or charity, we’ve detailed the most common options here.
Alternatively, if you’re venturing into new territory by establishing a social enterprise, our guide on navigating social enterprise legal structures offers valuable insights.
When choosing the right structure for your NFP, ask yourself:
- Will I be running the organisation with a charitable purpose?
- What is my current budget?
- How much administration am I prepared to manage?
- What am I aiming to achieve with the chosen structure?
- Where do I envision my organisation in the future?
If none of the common structures truly meet your needs, it might be worth considering setting up an NFP company.
What Is An NFP Company?
An NFP company is an organisation that does not operate primarily to make a profit. Instead, it is driven by a social, charitable, or community-focused purpose – whether that be cultural, educational, or religious.
- Cultural
- Educational
- Religious
For example, a charity qualifies as a not-for-profit organisation because its primary aim is to further a charitable purpose rather than generate profit.
There are also Community Interest Companies (CICs), which operate for the public benefit, ensuring that any surplus income is reinvested into furthering their mission.
It is vital to familiarise yourself with the specific registration processes for each structure. For instance, if you wish to set up a charity, you will need to adhere to the guidelines set by the Charity Commission.
On the other hand, if you opt for a CIC, registration is handled through Companies House, with guidance updated for 2025.
Other options include setting up a Charitable Incorporated Organisation (CIO), which offers the benefits of charitable status without the additional administrative burdens of a full company registration.
Each legal structure has its unique advantages and challenges – from tax concessions to administrative complexities. It is therefore advisable to consult a lawyer who can review your organisation’s goals and determine the most suitable structure in line with the latest legal updates.
Is An NFP Company Right For Me?
To decide whether an NFP company is the right fit, you need to consider if your organisation is truly driven by a charitable purpose and if you’re comfortable with the inherent restrictions—such as not disbursing dividends to members or directors.
You should also reflect on remuneration policies: under an NFP company structure, directors are generally not paid fees for their services, though they can claim reimbursements for approved expenses like travel costs. Furthermore, directors may be employed and receive a salary in an employee capacity.
If these requirements conflict with your operational plans, then an NFP company may not be the ideal structure for you.
However, if your mission aligns with these stipulations, you should familiarise yourself with the compliance requirements needed to maintain this structure.
It is always a good idea to speak with a qualified lawyer who can help clarify your options and ensure your chosen structure supports your long-term goals.
How Is An NFP Company Different To A Company Limited by Guarantee?
Perhaps the most common structure for charitable organisations is a Public Company Limited by Guarantee (CLG). In 2025, CLGs remain popular owing to their flexibility in attracting both private and public funding.
The key difference is that an NFP company is structured as a private company, meaning it can only attract private funding; whereas a CLG is a public company that is open to public investments.
There is also a difference in terms of liability:
- A private limited company (Pty Ltd) is limited by shares, meaning members’ liabilities are confined to the value of their shares.
- In a CLG, members’ liabilities are limited by a guarantee – typically a nominal amount payable if the company is wound up.
Both structures can operate as charitable entities and may qualify for charity registration, provided they meet the necessary legal requirements. Understanding these nuances is essential – as discussed in our guide on business structure distinctions.
How Does An NFP Get Funding?
You might be wondering, “if an NFP doesn’t generate profits, how do they secure funding?”
Generally, not-for-profit organisations secure funding through donations, grants, and contributions from trustees and founders. Any surplus income is reinvested into the organisation’s mission. In 2025, many NFPs are also leveraging innovative fundraising methods – from digital campaigns to community grants – to support their objectives, as highlighted in our business partners’ guide.
How Do I Set Up An NFP Company?
If you’d like to establish a special purpose NFP company, it is essential to get it right from the start.
When setting up an NFP company, there are two key steps you need to follow:
- Draft a tailored Company Constitution
- Complete the appropriate registration process for your chosen structure
For Step 1, your Constitution must clearly state that:
- All income will be used solely for a charitable purpose
- No fees will be paid to members or directors as dividends
- Any expense reimbursements (for example, travel costs) must be approved unanimously by all directors
After this, ensure that you complete the correct registration forms accurately. It is advisable to consult a lawyer to confirm you are meeting the latest 2025 registration requirements. Regularly reviewing your organisational documentation is also essential to remain compliant. For further guidance, our Industry Regulations Guide is a useful resource.
What’s Next?
Now that you’ve set up your NFP company, there are additional administrative tasks to consider. We always recommend speaking to an accountant to ensure your financial systems are correctly established. For example, you might consider:
- Opening a dedicated company bank account
- Registering for Gift Aid to secure tax relief on donations
- Reviewing and updating your insurance coverage
- Establishing effective systems for fundraising and donations
If you’re thinking about formally transitioning into a registered charity, you will need to apply to the Charity Commission. Once registered, the Charity Commission will take over as your primary regulatory body. Be sure to discuss the detailed tax implications, including Gift Aid, with your accountant.
Additionally, keeping your organisation compliant with the latest legislation is critical in 2025. Regularly update your filings with Companies House and review any changes from the Charity Commission. Subscribing to our legal tips newsletter will help you stay informed.
Speak To A Lawyer
If you need help understanding your options or require assistance with setting up your structure, our experienced legal team is here to support you. We offer expert guidance to ensure your organisation is both compliant and well-positioned for success.
It’s always a good idea to speak with a qualified lawyer who can walk you through your options and the implications of the various structures—especially if you want to get it right from the outset. You can reach our friendly team on 08081347754 or email us at [email protected] for a free, no-obligations consultation.
Get in touch now!
We'll get back to you within 1 business day.
Top 3 Legal Mistakes
Book in a free consultation with us to discuss your legal needs.
0 Comments on "Not-For-Profit Company Formation: Our Guide (2025 Updated)"