Think about how setting up a new organisation will help you to
deliver your vision and aims. Start by spelling out your vision of success –
what will have changed if the new organisation is successful in ten years’ time?
Then list three to five aims that you intend to achieve to deliver your vision.
Next, what exactly will the organisation do and how
will it do it? Are there existing organisations that already offer what you
intend to provide? Duplicating a service can be expensive and create ill-feeling
between you and your competition. Working with an existing organisation could
save time and result in a better outcome.
Finally, if you are considering applying for
charitable status (see below), you should consider whether your vision and aims
fit within the list of charitable purposes as defined by the Charities Act
Organisations that have charitable status are given
- They can find it easier to raise grant funding.
- They don’t pay tax on most of their income,
including income from donations, trading and sale of assets.
- They can claim gift aid on donations.
However, charities do pay tax on dividends and on profits
from developing land and buildings. Trading (social enterprise) is allowed
where it is undertaken for the charity’s main objectives. This is known as
primary-purpose trading, for example, a community theatre group selling tickets
for its performances. You will need to assess whether your trading is
undertaken for community/public benefit, or whether it is primarily to benefit
your members/investors – in which case you cannot be granted charitable status.
If any trading is not primary-purpose trading, there are
limits on the proportion of your income that can be generated in this way. For
example, charities with a turnover between £20,000 and £200,000 cannot generate
more than 25% from trading. You can find more information on charities and
trading, including trading subsidiaries here: https://www.gov.uk/guidance/charities-and-trading.
If the purposes of your new organisation are exclusively charitable
for public benefit (which is what Big Local funding is for) and if it will comply
with rules on trading, you can apply to the Charity Commission for charitable
status. You can find more information at https://www.gov.uk/government/publications/public-benefit-the-public-benefit-requirement-pb1/public-benefit-the-public-benefit-requirement.
The legal forms for charitable organisations are:
- Charitable company limited by guarantee
- Charitable incorporated association
- Charitable community benefit society.
The Charity Commission has guidance on these forms here: https://www.gov.uk/running-charity/setting-up.
Consider how the new organisation will be financed, both in the
short and the long term. What is the source of your income, initially and in
the long term, and will it cover your expenses?
Income may come from:
- membership fees
- fundraising events
- trading/service level agreements and chargeable
If your organisation will be reliant on grants – from Big
Local or elsewhere – any long term future is determined by funders. The
organisation is more likely to be sustainable if it has various sources of
income, so it will be important to draw up a business plan and ensure it is
If you will be dealing with large amounts of funding,
holding property, entering into contracts or employing staff, an incorporated governance
model with legal identity will limit the liability of individuals involved on
the governing body.
An organisation with charitable objects can apply for grants
from a variety of funding organisations. A few funders will award grants to
social enterprises that do not have charitable status but operate for community
benefit, such as community interest companies (CICs) and co-operative societies.
Some organisational forms have specific powers to raise funds: for example, community-interest
companies can raise share capital, and community-benefit societies and co-operative
societies can issue community shares.
Most incorporated organisations are owned by members, who
then appoint trustees or a board of directors at an annual general meeting.
There are three types of membership;
- Participatory - anyone interested in
participating can apply to the governing body to become a member.
- Open - anyone meeting particular criteria (e.g. living
in a specified geographical area) is eligible to be a member.
- Closed - members of the governing body appoint
new governing members.
Your decision on membership is important, because Local
Trust will want to ensure that any new organisation respects the role of the
Big Local partnership and ensures that the voice of local residents will be
heard in the long term. Your governing document will also need to allow for the
removal of members, should the need arise.
If your Big Local partnership wants to become the locally
trusted organisation, you need to work out the relationship between the two –
are the directors/trustees of the new organisation also members of the Big
Local partnership? How do the governing documents for the new organisation
relate to the documents about how the Big Local partnership operates?
Is the Big Local partnership establishing an organisation to
deliver a project in the Big Local plan (such as to manage a community hub)? If
so, it is likely that some of the individuals on the new governing body will
also be members of the Big Local partnership. But not all members of the
partnership will be on the governing body, as the partnership and new
organisation are two different entities.
Partnership members oversee the delivery of the Big Local
plan. Directors or trustees of the new organisation have a responsibility to
act in the best interests of their organisation. If Big Local money is funding
the new organisation, the Big Local partnership will need to identify and
manage conflicts of interest. If partnership members are also involved in the
new organisation, how will non-conflicted decisions be made and how do you show
they are supported by the people in the Big Local area?
For organisations with legal identity, whatever governance
model is chosen, the organisation will be accountable to Companies House and/or
the Charity Commission, and maybe the Financial Conduct Authority or the Audit
Commission as well. There are requirements to make annual returns and submit
reports in a specified format. Failure to submit reports on time may result in