Running a business as a charitable company - annual obligation to become a charitable company: if you are thinking of setting up a charitable company, it is easy to get carried away by your enthusiasm. This is only natural but it is important that you understand both the steps needed to become a charitable company and the ongoing obligations of the organisation. To set up a charity company you will need at least two trustees. You will also need to produce your governing documents, which set out how the charity is to be run and what your charitable purpose is. The next step is to decide on the legal form your charity will take.
There are a number of options to consider concerning the structure of your charity company. A tried and tested method is that of incorporating a charity company that is limited by guarantee. This provides your trustees with limited liability. A newer structure is that of a Charitable Incorporated Organisation (CIO). This was brought in at the end of 2012 to provide a single regulatory framework for charities. Traditionally charities have to report to both the Charity Commission and Companies House. A CIO only needs to report to the Charity Commission. The CIO also provides trustees with the protection of limited liability.
When you decide to become a charity company, you will also have a number of annual obligations. If your charity has an annual income in excess of £10,000 then by law you must complete an annual return. This must be completed within the ten months after every accounting period. This return includes all of the details about your charity, including contact details, what it does and how it makes and spends its money.
This information is kept on the Charity Commission website, where over 6 million people look for charities every year, so it can also be an important fund raising tool. If your charity raises less than £10,000, you should still use this return to meet your legal obligations in keeping your details up to date.
You must produce annual accounts, much like a regular company. There are different rules depending upon the size of the charity. Your charity also needs to produce a trustees' annual report. If the charity receives more than £25,000 per year, this report must be sent to the Charity Commission.