8. Have you chosen your charity’s legal form?
Charities can take a number of legal forms. The legal form is the structure, which becomes a charity. Some of these structures are ‘unincorporated’ and some are ‘incorporated’.
The main 4 types of charity legal form are:
|
Incorporated |
Unincorporated |
|
Scottish Charitable Incorporated Organisation (SCIO) |
Unincorporated association |
|
Company |
Trust |
Around 70% of new applications to become a charity are for an incorporated legal form, mainly SCIOs.
What you plan to do will help you choose the right legal form:
- Will you own or rent property?
- Will you employ staff?
- Will you enter into contracts?
If the answer to any of these questions is ‘yes’ you should consider an incorporated legal form.
What is an incorporated legal form?
Being incorporated means the law considers your organisation to be a person in the same way as an individual. This is called having a legal personality.
Having a legal personality means your organisation can do many things in its own name, like:
- employing staff
- entering into contracts and service agreements
- owning land or other property
- taking legal action
It also means that generally the charity trustees aren’t personally liable for what it does.
What is an unincorporated legal form?
If your organisation is unincorporated, that means it has no legal personality of its own and:
- the charity trustees are personally liable for what it does
- it won’t be able to enter into contracts or control some investments in its own name
- one or more trustees will have to ‘hold’ any land or property on its behalf.
Governing documents
A governing document is the written statement that sets out a charity's purpose, structure and describes how it will operate. It can also be called a constitution. Different types of legal forms require different types of governing documents. Our section Have you prepared the correct governing document for the proposed charity? contains information on governing documents and provides links to model governing documents that you can use.
More information on legal forms
You can find more detail on the most common legal forms for Scottish charities in the following places: