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Starting a new charity is an exciting time to make a positive difference, but the legal side of things can sometimes feel overwhelming – especially with the latest updates for 2025.
Whether you’ve just got an idea, or are already active in your community, if you’re looking for guidance on how to get your legals right, you’ve come to the right place. Our updated advice ensures you’re equipped with the latest information and best practice in UK charity law.
To help you navigate the process, we’ve put together a two-part blog series on how to set up a charity. This series now incorporates the most recent guidelines and compliance requirements for 2025.
This Part I will cover the different legal structures available for your charity. Specifically, we’ll explain what it means to “incorporate” a charity and whether you should set up your charity as a:
- Charitable Incorporated Organisation (CIO)
- Charitable Company (limited by guarantee)
- Unincorporated association
- Trust
If you already know which structure suits your vision, you can skip this article and go straight to Part II: Get Registered. For further insight on choosing the right legal structure, feel free to also check our guide on Business Set-Up: Business Structure.
In this article, we focus on the two leading structures – CIOs and charitable companies limited by guarantee – that are most commonly used by established charities in 2025.
What Does It Mean To Incorporate A Charity?
Incorporating your charity means it becomes its very own legal entity, independent of its members. This separation offers significant benefits in terms of flexibility and protection, as your charity can own property, enter into contracts, and in fact be held liable in its own name rather than that of its members.
Some of the primary advantages of incorporation include:
- Having its own legal identity
- The ability to sign agreements and manage finances independently
- Limiting liabilities for the individual trustees or members
- Enhanced credibility when dealing with donors and partners
On the other hand, if you opt for an unincorporated charity, you remain personally exposed to risks arising from debts or obligations. In such a structure, the charity’s liabilities are not legally separated from those of its members, meaning you could be held personally liable if things go wrong.
If you decide to go the unincorporated route, you’ll need to draft robust rules, clearly set out your charitable purpose, and then register with The Charity Commission. Please contact us if you need any bespoke advice or assistance with this process.
For more in‐depth details on how incorporation can benefit your charity, check out our comprehensive legal guides that cover a range of topics from intellectual property to commercial contracts.
If you want to know more about the incorporation process and its benefits, keep reading!
Which Structure Should I Choose?
When setting up a charity, it’s essential to choose a structure that complements your mission, scales with your operations, and meets both legal and operational needs. Updated guidance for 2025 suggests that most mid-to-large charities benefit from the protection and flexibility of an incorporated structure. We’ve also seen increasing numbers of charities adopting modern governance practices – a topic we discuss further in our Industry Regulations guide.
Charitable Incorporated Organisation (CIO)
A CIO is a popular structure that must be registered with the Charity Commission (it does not register with Companies House). In 2025, this remains one of the most straightforward means of protecting your charity with limited liability while ensuring compliance with regulatory requirements.
Under the CIO structure, your charity is recognised as a separate legal person, meaning it can enter into contracts, acquire assets, and incur liabilities independently of its members. This setup ensures that if the charity runs into financial difficulties, its founders and trustees are largely protected from personal liability.
However, note that the process of establishing a CIO involves a more detailed set-up compared to some other types of entities. If your charity intends to remain relatively small with limited activities, it might be worth considering whether the administrative investment aligns with your operational plans. For further guidance on setting up your legal framework, you might find our Business Partners guide useful in exploring various legal structures.
Charitable Company Limited By Guarantee
A charitable company limited by guarantee is another robust option that offers similar benefits to a CIO, including limited liability. However, unlike a CIO, it is regulated by Companies House, meaning it must adhere to additional reporting requirements and corporate governance protocols.
In this structure, instead of shareholders, the charity’s members act as guarantors who agree to contribute a nominal sum should it be necessary to settle the company’s debts. This added layer of financial protection benefits both the charity and its directors.
Much like with a CIO, you will be required to prepare a Constitution or governing document detailing key personnel, management responsibilities, and operational procedures. Learn more about setting up your governance documents on our Online Business Privacy guide, which now also covers recent changes in charity governance for 2025.
It’s important to stay updated – for example, Companies House and the Charity Commission have refined their registration processes in recent years. For a detailed comparison of these structures, see our article on choosing the right business structure.
Conclusion
There are many elements to consider when deciding on the legal structure for your charity. It is vital to understand the latest laws, compliance requirements, and operational implications to make informed decisions that best support your charity’s long-term success.
Are you still unsure about which legal structure is right for you? Our revised guidance for 2025 and a wide range of resources – including our Legal Essentials for Startups and Business Set-Up guides – are designed to clarify these complex topics. Feel free to contact us for personalised advice.
Once you have your legal structure sorted, it’s time to move to Part II: Get Registered. This next step covers the practical aspects of registration and compliance to ensure your charity is not only legally sound but also set for growth in 2025 and beyond.
Additionally, staying informed on recurring updates is crucial; we regularly update our resources to reflect changes by the Charity Commission and Companies House. Our Industry Regulations section is an excellent place to keep abreast of such changes.
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