Is starting a new charity the right move?
Originally published: January 2017. | Last reviewed: January 2017.
Leading a charity that makes a difference can be hugely satisfying. But it can also be a long, hard slog, leading to burnout and exhaustion in extreme cases. In a tough funding landscape and with more public scrutiny than ever, things are unlikely to get easier for charity leaders.
As the head of registration of new charities at the Charity Commission writes: "Running a charity of any size is a big responsibility. The public holds charities in high esteem and expects them to be run well… After all, you may be handling other people's money, or they may be using the service you are providing, so there is a lot at stake."
Before taking the leap, ask some honest questions and do enough research to feel confident that your charity has a good chance of surviving.
Is a new charity the only way to achieve your goal?
Around 200,000 charities are registered in the UK (including unregistered ones, the total could be closer to 400,000, according to some estimates). That's a lot of organisations — and one of them may already be doing the exact thing you've got your eye on.
Check what's happening in your local community or in your focus area. Talk to the people you're hoping to serve or to those working in related sectors to understand who else is around. You can also use the Charity Commission's register of charities (or the Scottish Charity Register or the Charity Commission for Northern Ireland's search page), or contact your local council for voluntary service (CVS) to find out who's operating nearby. If you do come across something relevant, you may find it makes more sense to work with them — as a volunteer, fundraiser, trustee or perhaps running a new project for them — than to set up your own venture.
In some cases, you can link in to an existing national network. If you're thinking of doing something for people who don't have enough to eat, for example, you can apply to open a foodbank as part of the Trussell Trust network. Doing so will allow you to benefit from valuable resources and expertise instead of starting from scratch.
Should it be a charity — or another type of organisation?
If you know you want to create a new organisation, a charity can feel like the obvious option. But there are three important considerations here: will your work make you eligible to operate as a charity? If so, can you work within the restrictions of charity status? And, finally, are you prepared for the public scrutiny this status can bring?
Charitable purpose and public benefit
Many nonprofit organisations aren't charities, such as those registered with HMRC as community amateur sports clubs or noncharitable social enterprises. To be considered a charity in the UK, your organisation must have charitable purposes only, as defined by the Charity Commission (which means many political organisations can't become charities). And the charitable purpose(s) must be for the public benefit. This would exclude, for instance, some organisations whose service users are too narrowly defined, or those serving only a specific ethnic or other minority group if this can't be justified. The Charity Commission goes into more detail on this, while its equivalent in Scotland, OSCR, has a useful "meeting the charity test" guide.
Advantages and disadvantages of charitable status
There are some important benefits of operating as a registered charity, including tax breaks and public trust. But there are also a number of restrictions. For example, a charity:
- Can't pay or otherwise give benefits to a trustee or to a person connected with a trustee (for example, a trustee's spouse) except in certain limited circumstances or with prior approval of the charity regulator
- Can't take part in certain political activities
- Must not infringe certain restrictions on trading
If the last point is a concern, you might decide that a noncharitable model is more fitting, although there's also the option of setting up a charity with a trading subsidiary.
Will you have the resources to operate?
As much as charities hope to collaborate with each other, every new nonprofit on the scene means more competition for limited funding. So, do some initial research to see what grants exist to support your cause. If you struggle to find much that's relevant to your area of focus, you may need to rethink your approach.
You should also think about what wider resources might be available to you.
If you don't already have a network to draw on for your future staff, volunteers, board members, donors and so on, how will you find these people? What about a legal adviser, accountant or any other professionals you need? And what about your own time — are you ready to work long hours and make sacrifices of personal time and energy?
Expert input and advice for this article was provided by Interface Legal Advisory Service, which specialises in providing low-cost and user-friendly assistance to charities and other nonprofits.
Looking for US-specific guidance? Read about considerations for U.S.-based start-ups.