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AIBU?

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Have you set up a non profit?

60 replies

nonprofitorgs · 13/07/2025 14:10

I am thinking of setting up a non profit the aim of which would be to provide specific resources free or base cost (informative website and books), and I believe there would be public benefit so would qualify as a charity. A lot of work would be required to set up the resources and I would like to be paid for this and also to be able to pay for expertise and services, and payment would come from grants/donations and this would all be set up with transparency. Has anyone done anything similar and if so which structure did you use? I am thinking that a charity with trustees might be inflexible and the admin element might become very time consuming and I am wondering if a company limited by guarantee might be more straightforward? But could that be seen as sufficiently not-for-profit to enable grants to be given?

Thanks!

OP posts:
sunshine244 · 18/07/2025 13:31

nonprofitorgs · 18/07/2025 13:25

company limited by guarantee is a straightforward structure. charities have a different structure from limited companies and are subject to different rules, and governance is a lot more complicated and admin heavy.

in relation to your other posts, your comments about grant applications are useful thank you. costs in relation to my idea are comparatively insignificant compared to the organisation(s) you fundraise for though, from the sounds of it.

Edited

I have read the whole thread. If you are just a straightforward Ltd company you'd have very little access to grant funding (possibly small amounts of start-up business funding). If you are a Ltd company which registers as a charity you'll have all the same hoops to jump through. A CIC is slightly less onerous in terms of governance but has a lot of the same sorts of requirements for trustees etc.

Also worth noting that some of the biggest grants are now asking for min 1-2 years of charitable accounts before you can even apply, because so many new charities are failing currently.

nonprofitorgs · 18/07/2025 13:25

sunshine244 · 18/07/2025 12:46

I've been involved in charities and fundraising for 15 years. I agree with other comments that funding is much harder to get now than ever before. It's been really disheartening seeing funding criteria getting ever tighter, funding pots shrinking and the number of people applying going through the roof. With landfill trust funding paused (not sure if that's just in Scotland) that's put even more pressure on.

Running a charity is a huge amount of work and new guidelines have come in recently adding even more layers of complication. I assume from your comments that you haven't ever been involved in charity governance? Just making sure a charity is complaint with all the various laws is a job in itself.

company limited by guarantee is a straightforward structure. charities have a different structure from limited companies and are subject to different rules, and governance is a lot more complicated and admin heavy.

in relation to your other posts, your comments about grant applications are useful thank you. costs in relation to my idea are comparatively insignificant compared to the organisation(s) you fundraise for though, from the sounds of it.

OP posts:
SumUp · 18/07/2025 13:03

But even so, a lot of charities are struggling to fund their existing services so I am not sure how enthusiastic they would be.

I cannot emphasise how tough it is at present to start something from scratch on your own and get paid a wage to do it. Sorry to be another negative voice.

SumUp · 18/07/2025 13:00

I would find another suitable organisation that might be willing to take on your idea. Volunteer with them for a while to help you develop your understanding of the charity landscape and you can get to know one another. If it feels right, you could suggest a collaborative grant application, with agreement that you would take on the running of the activity if successful.

A lot of grants specifically will not cover salaries, and you would need to do the grant finding and take the lead on the application without being paid for your time.

sunshine244 · 18/07/2025 12:54

Also - when government announcements about funding are made it often sounds huge. But by the time it's divided up across regions it's often not. For example there was a 2.6billion pound fund I applied to for a charity recently. That had been divided up between all the UK councils. Our area just got £200k. Charities and local businesses could apply for up to £20k and I expect hundreds will apply, and the vast majority won't get anything.

sunshine244 · 18/07/2025 12:46

I've been involved in charities and fundraising for 15 years. I agree with other comments that funding is much harder to get now than ever before. It's been really disheartening seeing funding criteria getting ever tighter, funding pots shrinking and the number of people applying going through the roof. With landfill trust funding paused (not sure if that's just in Scotland) that's put even more pressure on.

Running a charity is a huge amount of work and new guidelines have come in recently adding even more layers of complication. I assume from your comments that you haven't ever been involved in charity governance? Just making sure a charity is complaint with all the various laws is a job in itself.

nonprofitorgs · 18/07/2025 12:32

spannasaurus · 15/07/2025 19:55

A "charity limited by guarantee" is simply a company limited by guarantee that has charitable status .

It's the charitable status that gives tax exemptions not the limited by guarantee. The poster was responding to a claim that companies limited by guarantee don't pay corporation tax.

I appreciate and agree with all your advice. Last time I looked, corporation tax was not a significant amount. There won't be much profit as such as all money coming in will be used and accounted for in a transparent way and no dividends obviously. So I am not too worried about this. Am I being realistic?

In terms of being transparent, many professions use time sheets and I was considering publishing these so that people could see exactly where money was going. I might be being naive here though and creating a rod for my own back.

Really appreciate all the amazing advice here.

OP posts:
nonprofitorgs · 18/07/2025 12:26

@OchreSwan @venusandmars
Really appreciate your input. Please don't worry about being negative!

Firstly if I went with the company limited by guarantee route with the asset block this is in fact a really straightforward structure, and the articles of association etc are straightforward to produce and the requirements for numbers of people are straightforward too. My idea is very straightforward and no one is providing it at the moment and so would be very clear to anyone reviewing it who knows about the area (and I can give lost of information about why it is needed). None of this would be very timeconsuming for me to set up.

Doing the resources ie doing the actual work involved would be very timeconsuming however, research is needed and i would need to liaise with various people. I would be the only person who would do it because I understand the area and no one else has ever tried to do it so there aren't people out there who could be employed to do it. I would want to be paid for this work.

Secondly what I am still confused about is why you think grants will be dependent on there being lots and lots of people involved and lots of people doing volungary work and unpaid work - because none of this is a legal requirement - are you saying that people who give grants require this absolutely and across the board? A bit cheeky of me perhaps as I haven't googled it, but can you link one of these documents which sets out all these requirements?

Someone has suggested crowdfunding - is it difficult to get support in this way too at the moment in your experience?

I was being cynical when I said there is a lot of money swishing around for some issues - for example if you look at funders of certain agenda driven/minority interest groups you will see billions being given - this is public knowledge. Sadly my idea is not agenda driven and not about minority interest groups! So it is not really relevant to this thread, I was just commenting.

OP posts:
EilonwyWithRedGoldHair · 15/07/2025 20:09

Just agreeing with the comments about getting grants. The 30 year old charity I work for is closing in a couple of months. Lots of projects are disappearing, small charities are closing or being swallowed up by larger charities.

The situation in the third sector is not good atm, and it doesn't look like it will improve in the near future.

But you could check with your local voluntary sector council to see if they could offer advice.

spannasaurus · 15/07/2025 19:55

Rainbowsandmiracles · 15/07/2025 19:51

That’s a company limited by guarantee not a charity limited by guarantee - a charity limited by guarantee wouldn’t have share holders and dividends and as they hold dual registration with the charity commission would benefit from the same exemptions eg not paying corporation tax on grants donations etc they would also benefit from not having to pay it on primary purpose trading providing all profit is reinvested

Edited

A "charity limited by guarantee" is simply a company limited by guarantee that has charitable status .

It's the charitable status that gives tax exemptions not the limited by guarantee. The poster was responding to a claim that companies limited by guarantee don't pay corporation tax.

Rainbowsandmiracles · 15/07/2025 19:51

taxguru · 15/07/2025 19:42

That very webpage you linked confirms that a Limited by guarantee is liable to corporation tax in the same way as a normal limited company....

"Yes. Limited by guarantee companies are subject to have the same taxation requirements as regular private companies limited by shares. For example, any profits the company makes will be subject to Corporation Tax. Further, should any dividends be declared, then the dividends will be taxed for the individual(s) receiving those dividends at the relevant dividend tax rate."

That’s a company limited by guarantee not a charity limited by guarantee - a charity limited by guarantee wouldn’t have share holders and dividends and as they hold dual registration with the charity commission would benefit from the same exemptions eg not paying corporation tax on grants donations etc they would also benefit from not having to pay it on primary purpose trading providing all profit is reinvested

taxguru · 15/07/2025 19:42

That very webpage you linked confirms that a Limited by guarantee is liable to corporation tax in the same way as a normal limited company....

"Yes. Limited by guarantee companies are subject to have the same taxation requirements as regular private companies limited by shares. For example, any profits the company makes will be subject to Corporation Tax. Further, should any dividends be declared, then the dividends will be taxed for the individual(s) receiving those dividends at the relevant dividend tax rate."

Rainbowsandmiracles · 15/07/2025 19:38

So I am founder of multiple charitable organisations (all of which are still running I tend to get them to operational stage and pass the baton), have been employed by the sector, a consultant and have a degree in charity and social enterprise management. Have a look on the charity commission website the guidance is above if you are a small unincorporated charity it is very difficult to fund a wage legally. You can as a trustee of a CIO but you will need permission from the charity commission to do this and a minimum of 2 other trustees who would not be personally gaining. You could register as a charity limited by guarantee but have similar restrictions. A CIC is fair more flexible and would allow you to take a wage immediately but grants and fundraising are harder with this legal structure. A kickstarter/crowdfunding arrangement might work for you.

As many posters have said it is hard to fundraise at the moment - more people than ever are relying on charities so there is more competition for grant funding with lots of grants being contracts in every thing but name. If you have funders in mind reach out to them and see what they say. Another area you are going to struggle with is you haven’t got a track record or annual accounts and whilst this may not be an issue for some funders most will want your most recent annual accounts.

If you are set on the charitable route rather than a CIC (and some CICs are massive global organisations but you will need to show the regulator that you have a community benefit) then working with another organisation could be a better bet but I suspect many would view it as you trying to trade off their name to be paid - I’m sorry if that is a harsh view but I know I am approached for that regularly and sometimes we say yes and will enter into an agreement with them if there’s enough benefits to those we are supporting but more often than not it’s a no because we end up holding all of the risk.

OchreSwan · 14/07/2025 18:26

nonprofitorgs · 14/07/2025 15:25

Could you explain a bit more about what you mean here, and what sort of professional you are, or perhaps PM me? Because in relation to some areas, there is a lot of funding available. Not in relation to my area necessarily, but I am slightly confused about your post as some areas are receiving huge amounts. What do you mean by "the fundraising landscape" - which areas are you talking about?

Also I am not sure why you would advise against it so strongly, as there is no risk or liability for me going into this - it can go as quickly or as slowly as funds allow - so i am confused by your very forceful advice against it.

I don't think there are any bodies doing what I would like to do, as I said upthread. I have either spoken to them or looked at their websites.

Edited

Apologies if I have come across as harsh in my post. I am a professional charity fundraiser and as @venusandmarshas said, this is an unbelievably difficult time to be fundraising for charitable causes, pretty much regardless of the specific area you are working in.

Grant-making trusts are getting thousands of applications from established charities with a proven track record of success and impact, for funds which may only have £10,000 to distribute in total. Of course it’s not completely impossible, and it might be that you’ve landed on a really excellent idea which isn’t already being served. And of course, someone does have to be successful with these funding rounds. But it doesn’t change the fact that to be in with a real chance of success you will almost certainly need to have pre-existing relationships with funders who are willing to take a chance on you.

@venusandmarshas done an excellent job of going into the finer details and I agree with everything they say.

venusandmars · 14/07/2025 16:53

Sorry, I wasn't clear in my post. To set up an organisation that can apply for grants the majority of the 'officers' or organisers or management board should be people who are unpaid. To establish a charity you usually need 3 unpaid officials - including a chair and a treasurer. If you wanted to be paid you would have to be 'employed' or commissioned by the board to undertake the work that they (as Trustees) deemed necessary. You could not be part of that decision. You cannot be the sole organiser, and be paid for your efforts. If you were doing that you would effectively be a self employed business (albeit with a beneficial social aim). And as a business you would not be eligible for most grants.

A charity or CIO needs a strong and clear governing document setting out the demonstrated need for your services / product (real hard evidence, much more than 'other likeminded people who thinkg there is a need'), and clarity about how you meet that public need, in a way that is not met by other organisations. You need clear systems of governance - how decisions are made, who is accountable. You need an annual report and accounts. You need to set up banking arrangements. Please do not underestimate how much work this all takes - none of which you can be paid for.

By 'challenging' I mean for example that there are many, many more organisations seeking funds than there are bodies who offer grants, it is the most competative time I've ever known, and you will be up against professionals who have years of experience and make grant applications as part of their career. Most grant giving bodies have quite narrow specifications e.g. people living in a specific area, or of a certain age, or within a specific index of deprivation. Researching grant opportunities and gathering the required information is a vast job in itself (unpaid). There may be stringent requirements around your (agreed and published) policies on diversity and inclusion. You will have to know how you will monitor and measure the impact of your work - how many people benefit, what change you are expecting, how you will know it has happend. This is more about outcomes than outputs. Four thousand people receiving a book or other information means nothing if there is no subsequent and measurable impact or change.

There are often quite long times lags - deadlines for the grant giving commitees to meet etc.

If you don't personally know anyone else who supports your aim then I honestly can't see how you can get this idea off the ground. Do you have strong connections with the 'community of need'?

In your opening post you say "a charity with trustees might be inflexible and the admin element might become very time consuming". The requirement around these (which is not so different from a CIO) is not intended to result in inflexibility, rather the rules and sstructures are there to protect everyone who makes a charitable donationor bequeaths money to a trust, and to ensure that money is being spent wisely, appropriately, and that there is accountability.

Having been on all sides of the equation - an employee of a national charity, a Trustee, a business owner, someone who established a CIO, on the committee of a major grant giving organisation - I agree with @OchreSwan and strongly advise you against trying to do this at the moment.

To be more positive, perhaps start by developing strong links with the people who might benefit from your initiative. Find ways of getting in touch with others who share your views on the need for this, and find out how your values align. You cannot do this on your own.

I'd suggest you also look at the charity commision website and this https://www.gov.uk/setting-up-charity If you, and others, are going to go down this route, you really need to understand what you are getting yourself into, how much (unpaid) time it will take, and how difficulty it might be to get funding.

Then (as a group) you need to spend time researching the possible funding opportunities specific to your defined aims.

Set up a charity

To start a charity you need trustees, to choose a business structure, decide suitable charitable purposes and you may have to register with the Charity Commission.

https://www.gov.uk/setting-up-charity

nonprofitorgs · 14/07/2025 15:27

venusandmars · 13/07/2025 18:05

To set up an organisational structure that can apply for grants you really need to be more than one person. And certainly more than one person who wants to be financially rewarded for their efforts.

Not intending to be harsh, but if you look at the rules for any grant giving body you will se how challenging it can be.

Do you have a group of other like-minded people who share your values and ambitions? Is there a defnined and explicit community 'need' for what you intend to offer?

There is a need and there are likeminded people who think there is a need but I don't know them personally.

You can be as harsh as you like, it is very useful - can you give an example of what you are talking about in relation to "challenging" and "more than one person who wants to be paid" - are you able to link anything? Thank you very much

OP posts:
nonprofitorgs · 14/07/2025 15:25

OchreSwan · 13/07/2025 17:50

Going to echo what others have said but as a charity professional I would strongly strongly advise against doing this. The fundraising landscape is absolutely brutal at the moment and unless you already have access to significant numbers of people and trusts who you know will fund you, you will have a very hard time raising enough money to make this viable.

You will have significantly more success if you try reaching out to existing charities with established fundraising frameworks to see if this is something that can be offered.

It’s slightly unclear to me exactly what the idea is and who the target beneficiaries are, but I’d be quite surprised if someone isn’t already doing something like this unless it’s a very very niche topic.

Could you explain a bit more about what you mean here, and what sort of professional you are, or perhaps PM me? Because in relation to some areas, there is a lot of funding available. Not in relation to my area necessarily, but I am slightly confused about your post as some areas are receiving huge amounts. What do you mean by "the fundraising landscape" - which areas are you talking about?

Also I am not sure why you would advise against it so strongly, as there is no risk or liability for me going into this - it can go as quickly or as slowly as funds allow - so i am confused by your very forceful advice against it.

I don't think there are any bodies doing what I would like to do, as I said upthread. I have either spoken to them or looked at their websites.

OP posts:
venusandmars · 13/07/2025 18:05

To set up an organisational structure that can apply for grants you really need to be more than one person. And certainly more than one person who wants to be financially rewarded for their efforts.

Not intending to be harsh, but if you look at the rules for any grant giving body you will se how challenging it can be.

Do you have a group of other like-minded people who share your values and ambitions? Is there a defnined and explicit community 'need' for what you intend to offer?

OchreSwan · 13/07/2025 17:50

Going to echo what others have said but as a charity professional I would strongly strongly advise against doing this. The fundraising landscape is absolutely brutal at the moment and unless you already have access to significant numbers of people and trusts who you know will fund you, you will have a very hard time raising enough money to make this viable.

You will have significantly more success if you try reaching out to existing charities with established fundraising frameworks to see if this is something that can be offered.

It’s slightly unclear to me exactly what the idea is and who the target beneficiaries are, but I’d be quite surprised if someone isn’t already doing something like this unless it’s a very very niche topic.

cakeisallyouneed · 13/07/2025 17:49

Also look in CIOs as an alternative to a charity. They have less liabilities for the trustees. There’s lots of helpful resources on the charities commission website.
Also you can be a paid member of staff as well as trustee. As long as it’s declared on your annual reports and as a conflict of interest. You would not be able to be part of any conversations on pay, staff etc. For smaller charities set up by an individual, it does happen. Again charities commission can advise.

CaptainSevenofNine · 13/07/2025 17:45

CICs often find it harder to raise funds. Especially via trusts and foundations.

also where are you based? Different laws in Scotland.

nonprofitorgs · 13/07/2025 17:19

EsmeNoteSpelling · 13/07/2025 16:40

I work with a number of CICs that operate nationally - the ‘community’ can be a community of interest rather than a geographic one. I’d say it’s definitely worth a look.

www.gov.uk/government/publications/community-interest-companies-how-to-form-a-cic/community-interest-companies-guidance-chapters

Edited

Okay, many thanks!

OP posts:
spannasaurus · 13/07/2025 17:02

Quote the but where is says companies limited by guarantee aren't subject to corporation tax.

You won't be able to because that's incorrect.

I'm an accountant.

spannasaurus · 13/07/2025 16:56

DumbbellIdiot · 13/07/2025 16:45

Not if the company was limited by guarantee.

A company limited by guarantee is treated exactly the same as a company limited by shares for all purposes. The only difference between the two is members giving a guarantee vs members owning shares.