What’s the Difference Between a CIO and a Charitable Company

When setting up a charity one of the most important early decisions is choosing the right legal structure. Two of the most common incorporated options in the UK are the Charitable Incorporated Organisation (CIO) and the charitable company limited by guarantee. Both provide limited liability protection and both allow a charity to enter contracts, employ staff and hold property in its own name. Yet they work very differently in practice.

The choice matters because it affects regulation, administration, accounting rules, trustee responsibilities and the way you report to regulators. A CIO is a charity only, whereas a charitable company is a company and a charity at the same time. That distinction creates important differences in paperwork and governance. This article explains both structures in detail so you can decide which is best for your charity’s size, purpose and long term plans.

Why Charities Choose an Incorporated Structure

Incorporation gives a charity a separate legal identity. This means:

• the charity can hold contracts

• trustees are not personally liable for most debts

• the charity can employ staff

• the organisation can own property

• the charity continues even if trustees change

Both CIOs and charitable companies offer this protection which is why many organisations move away from unincorporated structures over time.

What Is a Charitable Company

A charitable company is a company limited by guarantee that has also been registered as a charity. This creates two layers of regulation. The organisation must follow company law and charity law.

Key characteristics

• Incorporated at Companies House

• Then registered as a charity with the Charity Commission

• Regulated by both Companies House and the Commission

• Trustees are also company directors

• Must follow the Companies Act 2006

• Uses articles of association as its governing document

• Must file annual accounts with Companies House

• Must file a separate return with the Charity Commission

Charitable companies have existed for decades and remain a popular structure, especially for larger charities, schools, grant makers and organisations expecting significant income.

What Is a Charitable Incorporated Organisation (CIO)

A CIO is a legal structure created solely for charities. It was introduced to make regulation simpler and reduce administrative burdens.

Key characteristics

• Registered only with the Charity Commission

• Not registered with Companies House

• Trustees are charity trustees only, not company directors

• Uses a CIO constitution as its governing document

• Files only one annual return and one set of accounts

• Offers limited liability protection

• Designed specifically for charities

A CIO is attractive to small and medium charities because it provides the benefits of incorporation with reduced paperwork.

Main Differences Between a CIO and a Charitable Company

Although the two structures appear similar on the surface, the differences become clearer when you compare how they operate.

1. Registration

Charitable company:

• Incorporation at Companies House first

• Then registration with the Charity Commission

• Two-step process

CIO:

• Registered directly with the Charity Commission only

• Single process

Effect:
CIO registration takes longer but once set up, ongoing administration is simpler.

2. Regulation

Charitable company:

• Regulated by Companies House and the Charity Commission

• Must follow both company law and charity law

CIO:

• Regulated only by the Charity Commission

• No company law duties

Effect:
CIOs have fewer reporting requirements and lighter regulation.

3. Reporting Requirements

Charitable company must file:

• annual accounts with Companies House

• annual accounts and trustees’ report with the Charity Commission

• annual confirmation statement

• annual return

CIO must file:

• annual accounts

• trustees’ report

• annual return
  (all with the Charity Commission only)

Effect:
Charitable companies have double reporting. CIOs have single reporting.

4. Trustee Responsibilities

Charitable company:

• Trustees are also company directors

• Must follow company directors’ duties under the Companies Act

• Increased legal obligations

CIO:

• Trustees are charity trustees only

• Duties come only from charity law

• Lower personal administrative burden

Effect:
CIO trustee roles feel simpler and lighter.

5. Governing Documents

Charitable company:

• Uses articles of association

• Must meet company law formatting standards

• Can be more technical

CIO:

• Uses a CIO constitution

• Based on Charity Commission model documents

• Easier for volunteers to understand

Effect:
CIO constitutions are more user-friendly.

6. Public Register

Charitable company:

• Listed at Companies House

• Listed on the Charity Commission register

CIO:

• Listed only on the Charity Commission register

Effect:
Charitable companies are more visible in standard business searches.

7. Accounting Rules

Both structures must follow charity accounting rules but:

Charitable company:

• Accounts must comply with company law

• Filing deadlines differ

• Penalties apply for late filing

CIO:

• Follows charity law only

• Deadlines are set by the Charity Commission

• Penalties are regulatory not financial

Effect:
CIO accounting feels simpler and avoids company penalties.

8. Ability to Hold Property

Both structures can hold property in the name of the charity. This is one of the advantages of incorporation. There is no major difference here.

9. Ability to Enter Contracts

Both structures can enter contracts in their own name which protects trustees from personal liability.

10. Complexity of Setup

Charitable company:

• Quick to set up with Companies House

• Charity registration can be slower

CIO:

• One-step registration

• Charity Commission checks everything

• Can take longer overall

Effect:
Fast setup favours charitable companies but simpler long-term admin favours CIOs.

11. Merging or Closing the Charity

Charitable company:

• Winding up involves Companies House strike off rules

• Two regulators must be informed

• More complex dissolution

CIO:

• Closed directly through the Charity Commission

• Clear CIO dissolution process

Effect:
CIO closure is easier.

12. Fundraising Perception

Some funders and partners feel more familiar with charitable companies because they have been around longer. However CIOs are now widely accepted.

Real World Examples

Example 1: Small community group

A small community organisation with a few volunteers wants limited liability but simple reporting. A CIO is the better option.

Example 2: Growing national charity

A large charity with several employees and high income prefers a charitable company due to familiarity among funders and established governance practices.

Example 3: Church moving from an unincorporated structure

A church seeking protection for trustees chooses a CIO because it simplifies administration.

Example 4: Charity already using a company structure

An existing company limited by guarantee that becomes charitable must stay a charitable company rather than converting to a CIO unless it goes through a restructuring process.

Advantages of a Charitable Company

• Faster to set up

• Familiar to larger funders

• Easy to add trading subsidiaries

• Recognised internationally for legal purposes

Charitable companies suit larger or more complex charities.

Disadvantages of a Charitable Company

• Double reporting

• Higher admin

• Penalties for late filing with Companies House

• Trustees also become company directors

Small charities often find this burdensome.

Advantages of a CIO

• Single regulator

• One set of accounts and returns

• Lower administration

• Trustees have simpler duties

• Designed for charities specifically

Ideal for small and medium sized charities, churches and community groups.

Disadvantages of a CIO

• Registration can take longer

• Less familiar to some older funders

• Not registered at Companies House for general public searches

Even with these limitations CIOs remain the most popular choice for new charities.

Which Structure Should You Choose

Choose a CIO if:

• you are a small or medium sized charity

• trustees are volunteers with limited admin time

• you want simple reporting

• you want one regulator not two

• you prefer a modern structure designed for charities

• you want easy closure or merging in future

Choose a charitable company if:

• your charity expects substantial income

• you want a structure that funders understand

• you plan to run trading subsidiaries

• you expect complex governance

• you want the familiarity of company law

For most new charities, CIO status offers the best balance of protection and simplicity.

Should Existing Charities Convert to a CIO

Many unincorporated charities convert to CIOs because:

• trustees gain limited liability

• the charity can hold property

• safeguarding and HR processes become easier

• administration becomes more efficient

Charitable companies can convert to CIOs but the process is more complex and requires careful planning.

Conclusion

A CIO and a charitable company both provide limited liability and a strong legal structure for charities. The difference lies in how they are regulated, how they report, how trustees are treated and how much administration is involved. CIOs are simpler because they report only to the Charity Commission while charitable companies must meet both company law and charity law.

For small and medium charities a CIO is usually the best option because it reduces bureaucracy and focuses on charity governance rather than company administration. Charitable companies remain the preferred choice for larger organisations with complex structures or substantial income. Understanding these differences helps trustees choose the structure that best supports long term stability and growth.