Step 1 Do you need to be a charity?

 

Do your research and get advice:
There are benefits that come with being a charity (like some tax reliefs), you need to balance these against the legal obligations that come with being a charity.

It’s not uncommon for people to think they need to set up a charity to do certain things, when that’s not always the case.

Do you want to start a charity or do you want to raise money?
If all you want to do is raise money for a good cause or an existing charity you don’t need to set up your own charity.

If you do plan to fundraise you will need to follow the rules in the Code of Fundraising Practice and its associated Rulebooks for Street, Door and Private Site fundraising. The Institute of Fundraising Scotland can give advice on fundraising. 

Remember: it is against the law to describe yourself as a charity unless you are on the Scottish Charity Register.

Is there a need for what you want to do?
There are lots of charities carrying out very similar activities: is there the need and the resources for what you want to do?  What makes your idea for a charity different?

Is there an existing charity you could get involved with? 
There are over 24,000 charities registered in Scotland, doing a huge range of things.  Why not work with one of them, volunteer or apply to become a charity trustee? These organisations can help with volunteering opportunities:

• Volunteer Scotland
• Good Moves
• Do-it Trust
• Local Third Sector Interfaces  

 

Will you have enough future funding?
Raising money through grants, fundraising or trading might start well, but we see charities struggling after a few years because their funding is not sustainable. Think about what you might need in the longer term as well as start-up costs.

Who will run the charity? 
Will you have a team of people? One of the main concerns we hear from existing charities is how hard it is to get and keep charity trustees (the people who control and manage a charity). Having the right mix of skills and experience is important throughout the life of a charity. Do you have people in mind to do this?

Do you plan to pay yourself for work with the charity?
Payments to charity trustees have to comply with strict rules. We look very carefully at applications where an individual plans to pay themselves once the charity is set up. We will ask questions about why that individual should be paid. This is so we can assess private benefit.   

If you want to pay yourself a salary then being a charity is not the ideal route and you should consider an alternative.

Have you thought about the non-profit alternatives to being a charity?
The third sector in Scotland is made up of many different types of organisations, not just charities. Around half of the voluntary organisations in Scotland are not charities.

Some of these organisations can be also be charities, but they don’t have to be:

• Social enterprise
• Voluntary organisation 
• Community benefit society (Ben com)
• Community interest company (CIC): A Community interest company cannot be a charity.

There are advantages and disadvantages to being a charity.

Advantages: 

• Gives confidence to the public and funders that you are regulated.
• Can have financial benefits, some funders will only work with charities.
• Some tax benefits and rates relief from being a charity.
• Can open up new opportunities for funding and collaboration.
• Charity trustees have collective responsibility. Running a charity is a team effort and everyone is equally responsible. 

Disadvantages:

Many people give their money and time generously to help charities. As a charity trustee, you would be trusted to look after the charity’s assets and responsible for making sure that the charity fulfills its charitable purpose(s). 

Our surveys on public trust and confidence in charities show that the public have high expectations of the charity sector. Key drivers of public trust in charities are:

•        knowing that money goes to the cause
•        seeing evidence of achievements
•        knowing it is well run.