How Do I Choose the Right Structure for My Charity

Deciding how to structure a charity is one of the most important early choices trustees will ever make. The structure determines how the charity is governed, who is legally responsible, how fundraising works, what paperwork must be filed, whether the organisation can employ staff, and how much personal risk trustees face. A good structure supports growth and protects everyone involved. The wrong one can limit the charity’s activities or create legal complications later.

Because there are several structures available in the UK it is normal for new founders to feel unsure about which option is best. Each structure suits different types of charities depending on size, risk, purpose, and activities. This guide explains each option in clear terms, how the structures differ, what they mean for risk and compliance, and how trustees can make a confident decision.

Why Choosing the Right Structure Matters

A charity’s structure shapes almost everything about how it operates. It affects:

• Legal responsibility and personal liability

• Eligibility for grants and funding

• The ability to employ staff

• The types of activities the charity can run

• How decisions are made

• How easy it is to change trustees

• Whether the charity can enter contracts

• Reporting and filing requirements

In my opinion the most important factor is liability. Some structures give trustees personal legal responsibility for debts and claims. Other structures protect them completely. Understanding this difference helps avoid serious problems in the future.

The Four Main Legal Structures for UK Charities

There are four commonly used structures:

1. Charitable Incorporated Organisation (CIO)

2. Charitable Company Limited by Guarantee

3. Unincorporated Association

4. Charitable Trust

Each has clear advantages and disadvantages. The right structure depends on what the charity intends to do and how much risk is involved.

1. Charitable Incorporated Organisation (CIO)

The CIO has become the most popular modern structure for new charities. It was created specifically for charities and combines limited liability with simpler reporting.

What a CIO is

A CIO is a registered charity that has legal personality and can enter contracts in its own name. Trustees are protected from personal liability as long as they act properly.

Key features

• Registered with the Charity Commission

• Limited liability for trustees

• Can enter contracts and hold property in the charity’s name

• No need to register with Companies House

• Only one regulator to deal with

When a CIO is suitable

• Charities that plan to employ staff

• Organisations that will own or lease property

• Charities delivering services or entering contracts

• Groups that want a professional structure without heavy admin

Advantages

• Full legal protection for trustees

• Simple reporting structure

• Created specifically for charities

• Clear governance rules

Disadvantages

• Can take longer to register initially

• Slightly less well known to certain funders

• Harder to convert into a different structure later

In my opinion most new charities choose a CIO because it provides the best balance between protection and simplicity.

2. Charitable Company Limited by Guarantee

Before CIOs existed this was the main structure for incorporated charities. It is still widely used by larger and older charities.

What it is

A limited company that is also a registered charity. It has two regulators: Companies House and the Charity Commission.

Key features

• Trustees are also company directors

• The charity must file company accounts

• Limited liability for trustees

• Separate legal personality

When this structure is suitable

• Large charities with complex finances

• Organisations used to company reporting

• Groups that require a more corporate governance model

Advantages

• Strong governance framework

• Well understood by banks, funders, and lenders

• Easy to enter contracts and employ staff

Disadvantages

• Dual reporting to Companies House and the Charity Commission

• Higher administrative burden

• Greater risk of filing penalties

In practice this structure works well for established or complex charities but feels heavy for smaller start ups.

3. Unincorporated Association

This is the simplest and most informal structure. Many small local groups start this way.

What it is

A group of people coming together for a charitable purpose without creating a separate legal entity. The charity cannot hold property or enter contracts in its own name.

Key features

• Easy to set up

• Suitable for small volunteer led groups

• No limited liability

• No separate legal identity

When it is suitable

• Small community groups

• Organisations with no staff and minimal risk

• Groups that meet informally and run low cost activities

Advantages

• Very simple

• No registration needed unless applying to become a registered charity

• Minimal paperwork

Disadvantages

• Trustees have personal liability

• Hard to employ staff

• Cannot take on leases or large contracts

• Difficult to scale

I believe this structure only suits charities with extremely low risk and no plans to expand.

4. Charitable Trust

A charitable trust is governed by a trust deed and run by trustees who manage charitable assets on behalf of beneficiaries.

What it is

A legal arrangement where trustees hold money or property for charitable purposes. Trusts are common where a charity does not need a membership or company style structure.

Key features

• Focuses on stewardship of funds

• Can be registered as a charity

• Trustees often have long term control

Suitable for

• Grant making charities

• Charitable legacies

• Philanthropic funds

• Foundations

Advantages

• Simple for holding and distributing money

• Clear governance

• Works well for fund giving organisations

Disadvantages

• No limited liability

• Harder to run trading activities

• Structure can feel rigid

Trusts are ideal for charities focused solely on giving grants rather than providing services.

The Most Important Factor: Liability

One of the biggest differences between charity structures is whether the trustees carry personal liability for debts or legal claims.

Structures with personal liability:

• Unincorporated association

• Charitable trust

If a claim is made these trustees can be personally responsible.

Structures with limited liability:

• CIO

• Charitable company limited by guarantee

These structures protect trustees as long as they act properly and follow legal duties.

In my opinion this alone is enough for most modern charities to choose a CIO or charitable company.

Questions to Ask Before Choosing a Structure

Trustees should consider several key questions. The answers naturally point toward the right structure.

1. Will the charity employ staff

If yes, an incorporated structure is recommended. Only CIOs and charitable companies offer full protection.

2. Will the charity rent or own property

Property requires legal identity. CIOs and charitable companies are suitable.

3. Will the charity run services or take on contracts

Service delivery requires insurance, contracts, and safeguarding. Incorporated structures are safest.

4. Is the charity purely grant making

A charitable trust is often the simplest.

5. Does the charity expect rapid growth

Incorporated structures scale more easily.

6. Does the charity want light admin

A CIO offers simpler reporting than a charitable company.

7. How much risk is involved in day to day activity

More risk means more need for limited liability.

8. Does the charity need flexibility to change rules later

CIOs and charities limited by guarantee are easier to adapt than trusts.

How Each Structure Handles Governance

CIO governance

• Constitution sets rules

• Trustees manage the charity

• Can have voting members or trustee only membership

• Annual reporting to the Charity Commission

Charitable company governance

• Memorandum and articles of association

• Trustees are company directors

• Must hold board meetings and keep company registers

• Must file annual accounts and confirmation statements

Unincorporated association governance

• Governed by a simple constitution

• Trustees personally responsible

• Very flexible but low protection

Charitable trust governance

• Trust deed sets rules

• Trustees have strict duties

• No membership structure

A charity should choose the model that matches how it wants to make decisions.

How Each Structure Handles Fundraising and Grants

Some funders prefer or require incorporated structures. CIOs and charitable companies tend to attract more formal funding because:

• They show stronger governance

• They can take on obligations

• Liability is clearer

• Financial reporting is standardised

Unincorporated associations sometimes struggle with large grants because funders worry about legal and financial risk.

Trusts can receive significant donations but are usually used for giving not delivering services.

If a charity plans to apply for large grants in the future an incorporated structure may be beneficial from the start.

How Trading Activities Affect the Choice

If a charity plans to run trading activity such as:

• Selling goods

• Running a charity shop

• Providing services

• Running paid events

An incorporated structure offers better protection. Charities that take on trading risk often need a trading subsidiary, and incorporated charities can own subsidiaries more clearly.

Unincorporated associations and trusts find trading more complex and riskier because trustees are personally liable.

Administrative Requirements for Each Structure

CIO

• Annual report and accounts to the Charity Commission

• No Companies House filing

• Moderate admin

Charitable company

• Accounts to Companies House

• Accounts and report to the Charity Commission

• Confirmation statement

• Higher admin

Unincorporated association

• Light admin but harder to evidence governance

• May still need accounts if registered

Charitable trust

• Medium admin

• Trust law rules apply

If a charity wants simpler administration a CIO is often the best choice.

Cost Differences Between Structures

• CIO registration is slower but not more expensive long term

• Charitable companies cost more because accountants must prepare company accounts

• Unincorporated associations are cheap to run

• Trusts depend on complexity

Cost should not be the only factor but it does influence start ups with tight budgets.

Real UK Examples

Example 1: Small Community Group Setting Up a Local Food Project

They have no staff, low income, and only run small events. An unincorporated association suits them because risk is low.

Example 2: Charity Planning to Employ Staff and Lease Space

This charity needs legal identity and liability protection. A CIO is the best fit.

Example 3: Foundation Giving Out Grants

A charitable trust is ideal because the charity will not employ staff or deliver services.

Example 4: Organisation Planning Large-Scale Service Delivery

They expect contracts with councils and need strong governance. A charitable company is a good choice though a CIO may also work.

Example 5: Charity Aiming for Major Grants and Long Term Growth

A CIO provides credibility, legal protection, and manageable admin for expansion.

Step by Step: How to Decide on the Right Structure

Step 1: Identify the charity’s purpose

Clarify what the organisation actually intends to do.

Step 2: Assess risk

Think about employment, property, safeguarding, finances, and contracts.

Step 3: Decide how the charity will operate

Is it volunteer only, service based, grant giving, or a mix

Step 4: Consider future plans

If the charity may grow it needs a structure that scales.

Step 5: Choose level of liability protection

Low risk charities can use unincorporated models. Others need incorporation.

Step 6: Review governance needs

Decide whether you want members or trustee only control.

Step 7: Check paperwork obligations

Factor in reporting, accounts, meetings, and filings.

Step 8: Ask for professional advice

Experienced charity advisers can confirm whether a CIO or charitable company fits better.

In My Opinion: The Best Structure for Most New Charities

In my opinion a CIO is the best all round structure for most modern start ups. It offers the right balance of:

• Limited liability

• Legal personality

• Simpler reporting

• Good governance

• No Companies House filings

• Strong credibility with funders

It avoids the dual regulation burden of a charitable company and gives far better protection than an unincorporated association.

The only exceptions are:

• Grant making foundations which suit trusts

• Large complex organisations which prefer charitable companies

• Very small low risk groups which suit unincorporated associations

Final Thoughts

Choosing the right structure is a foundation decision for any charity. It influences governance, liability, fundraising, staffing, and growth. There is no single correct answer for every charity but there is usually a structure that clearly fits once trustees assess their risks, ambitions, and operational needs.

A CIO is the most common choice for good reason. It protects trustees, simplifies administration, and gives the charity the legal identity it needs to grow. Trusts and unincorporated associations still have their place but suit narrower types of charities.

In my opinion trustees should take the time to make this decision carefully because changing a structure later can be difficult. A well chosen structure helps a charity operate confidently and responsibly for years to come.