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How to start a charity

Setting up a charity is no easy task, but with the potential to change people’s lives – could it be the right opportunity for you?

The steps to setting up a charity:

  1. Understand what is a charity and who is it suited to?
  2. Create your charity business plan
  3. Understand charity rules and regulations
  4. Discover the costs of setting up a charity – and how much a charity business owner can earn
  5. Review contacts and organisations to help with how to set up a charity

What is a charity and who is it suited to?

Many who start a business do so, ultimately, for themselves – they wish to gain financial independence, be their own boss or work in a sector that interests them. Those setting up a charity, however, have the interests of others at heart; defined by regulatory body the Charity Commission as an organisation set up to benefit a charitable purpose, a charity’s goals have to be completely altruistic. With more than 160,000 registered charities in England and Wales and untold numbers of smaller funds, starting a charity is an increasingly popular option for those who wish to change the world for the better and are willing to put their own financial interests on the backburner.

Most people who set up charities do so in response to an event or issue that is personal to them, such as the bereavement of a relative or a beneficial community project that needs backing. If your charitable goal is more generic and wide-ranging, such as curing cancer or ending world hunger, your money will almost certainly be better spent just donating to one of the UK’s many established charities; with so many around, it is an extremely competitive sector, and any attempt to enter the fray with a new general-purpose fund is almost certainly doomed to fail. Another alternative to starting afresh is to join an existing charity as a trustee; there are many resources to find such opportunities, such as the Trustee Bank, Trustee Net and Trustee Works.

It is also important to note that a registered charity cannot conduct a mix of charitable and non-charitable work, so if your goal is to start a revenue-generating business that donates a portion of profits to charity or has the side-effect of helping the public, you should look into starting a Community Interest Company or other social enterprise instead. “There are a range of options open to anyone who wants to start a ‘third sector’ organisation, and personally I think you should explore these rather than going straight to a charity structure,” advises Pat Broster, deputy chief executive of community interest company Life Story Network and former chief executive of a national environmental charity. “As an example, Community Interest Companies provide more flexibility to trade, directors have more control and there’s no need for a Board of Trustees – make sure you explore these less onerous alternatives before committing to starting a charity.”

Setting up a charity is not easy, and will require patience, an iron will, and real commitment to your cause. “I know lots of entrepreneurial people that have set up their own charities over the years, but the ones who have been successful displayed a very particular kind of determination,” says Honor Wilson-Fletcher, founding director and chief executive of educational charity the Aldridge Foundation. “If you’re starting a charity that’s planning to rely on government grants, for example, you’re likely to have financial security for a maximum of 12 months at a time – you have to accept that it’s going to be really tough.”

But despite the challenges you will face, there is nothing quite like running a charity, and seeing the impact you make can be an experience that no amount of turnover or profit can ever replace. “My job [at the Aldridge Foundation] is infinitely more complicated than anything I’ve ever done before – but about 42 times more fulfilling,” says Wilson-Fletcher. “The motivation you get from working with people whose life chances you are helping to transform is a thrill – it’s absolutely amazing.”

If you think you’ve got what it takes, read on.

Action point:
See if you can get a Start Up Loan to help you start your business
(external partner site, opens in new tab)

Ready to get started? Find out everything you need to know about how to start your own business here.