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Use this page to understand what you need to consider when choosing your legal structure and the main characteristics of different legal structures.
How an organisation is set up is known as its legal structure. There are many different legal structures to choose from. Choosing the right one is important as it will affect how your organisation works in terms of:
Here are four points to consider when choosing your legal structure.
An organisation’s legal structure is either unincorporated or incorporated. This determines if the organisation is viewed as being separate from those that run it. It affects how much your organisation’s members and directors are protected against any personal financial liability. The differences between the two are outlined below.
Charity status is not a legal structure. But whether you have charity status will affect the legal structure you can choose. This is because some legal structures cannot have charity status.
Your organisation’s constitutional members are individuals or organisations identified in your organisation's governing document. These constitutional members will have certain rights or powers in law to make decisions about how your organisation is run.
Examples of the legal rights or powers of constitutional members typically include:
The term ‘members’ can also refer to individuals who don’t have any constitutional rights but simply receive certain benefits from an organisation, such as access to facilities or a newsletter. These ‘members’ do not have any constitutional rights or powers.
An organisation’s legal structure will determine whether your organisation's constitutional members are a narrow or wider group (of individuals or organisations).
Some charity legal structures such as a Charitable Incorporated Organisation will allow your organisation to have either a foundation or association model of governance. If your organisation’s legal structure is an Unincorporated Association, your organisation will automatically have an association model of governance. This means a wider group of individuals or organisations will be able to make decisions about how your organisation is run.
You need to consider how your organisation will generate income. If your organisation plans to be part or wholly funded by grants and donations, you should consider a charity legal structure where charity status is available. Certain sources of grant funding are only available to those with charity status. Charity status also promotes public trust and confidence, encouraging people to donate to your organisation.
Find out about charity status.
If you're looking to generate the majority of your income by selling goods and services, you'll function as a social enterprise and can take on a variety of legal structures. A social enterprise is not a legal structure but a way of doing business.
To help you choose the right legal structure for your organisation, this page explains the following.
The table below outlines the characteristics of the main charity legal structures. The table is split into incorporated and unincorporated legal structures. The top row of the table outlines the following information.
There are other legal structures less commonly used by charities and more often associated with organisations with non-charitable purposes. These include the following.
In order to choose the right legal structure for your organisation, we suggest you read additional guidance and get professional advice.
Last reviewed: 03 June 2021Help us improve this content
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