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How to Start a Charity or Non-Profit: Legal, Governance, and Funding Essentials
- Julien Haye
- May 17, 2024
- 15 min read
Updated: Sep 30
Many people ask “how do I make a charity?” or “how do I become a registered charity?”
Setting up a charity or non-profit is both an inspiring and demanding undertaking. Beyond a desire to make a difference, founders must navigate legal requirements, establish governance structures, secure sustainable funding, and design programmes that genuinely serve their communities. The decisions made at the outset will shape the organisation’s ability to deliver impact, maintain credibility, and remain resilient in a changing environment.
Different jurisdictions set distinct expectations — whether it is registering with the Charity Commission in the United Kingdom, applying for 501(c)(3) recognition in the United States, or complying with NGO laws across Europe and other regions. Yet wherever they are based, successful organisations share common foundations: a clear mission, strong oversight, effective operations, and transparent reporting.
This article outlines twelve key themes that anyone looking to set up a charity or non-profit should address. Together, they provide a practical framework for moving from purpose to delivery, while also highlighting the regulatory and cultural nuances that shape the sector globally.
TABLE OF CONTENTS:
Mission and Purpose
The starting point for any charity or non-profit is a clear mission and purpose. This foundation defines why the organisation exists, shapes its governance, and guides every strategic and operational decision. It also ensures compliance with the legal standards required to achieve charitable status.
Defining charitable objectives is both a strategic and regulatory step.
In the United Kingdom, the Charity Commission sets out recognised charitable purposes such as education, the advancement of health, or the relief of poverty.
In the United States, the Internal Revenue Service requires that organisations applying for 501(c)(3) registration demonstrate purposes that are charitable, educational, religious, literary, or scientific.
Across the European Union and other jurisdictions, similar requirements are embedded in NGO and foundation laws.
Once the legal framework is clear, organisations must articulate their beneficiaries and community purpose. This involves specifying who will benefit, what problem is being addressed, and how the organisation intends to deliver change. A strong non-profit mission statement should provide clarity for donors, regulators, and the community, while also acting as a touchstone for the board and staff.
The mission also plays a critical role in governance and oversight. Effective oversight structures that are aligned with the organisation’s primary objective can build trust with funders, strengthen accountability, and improve long-term viability. Mission-driven decision-making ensures that programmes and investments are assessed not only on financial grounds but also on how they advance the organisation’s values and goals. When trustees, executives, and volunteers understand how their roles connect to the mission, they are better positioned to make decisions that benefit both beneficiaries and stakeholders.
Successful non-profits demonstrate how mission alignment translates into impact. Charity:
Water has used a transparent “100% model” to reassure donors that all public contributions fund clean water projects, reinforcing trust and amplifying results.
The Red Cross has built its oversight model around constant review of disaster response strategies, ensuring that it always fulfils its mission of alleviating human suffering.
Habitat for Humanity directly involves communities in decision-making, aligning projects with its purpose of building homes and hope.
These examples illustrate that a clear mission, combined with governance structures that honour it, creates not only credibility but also lasting impact.
Not every initiative requires a traditional charity structure. Depending on the objectives and jurisdiction, founders may establish a charitable trust focused on grant-making, a non-profit corporation designed to deliver services, or a foundation intended for philanthropic giving. Other models include community interest companies in the UK or associations common across continental Europe.
Each structure carries different rules for governance, reporting, and tax
treatment, so selecting the right model is essential to sustaining the mission.
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Legal and Regulatory Structure
Once the mission is clear, the next step in starting a charity or non-profit is choosing the right legal and regulatory structure. This decision determines how the organisation is governed, what reporting obligations it faces, and what benefits it can access, such as tax exemptions and the ability to fundraise legally.
The choice of legal form varies across jurisdictions.
In the United Kingdom, common options include charitable incorporated organisations (CIOs), companies limited by guarantee, and charitable trusts. Moreover, charities with annual income above £5,000 (or any charitable incorporated organisation) are required to register with the Charity Commission Register of Charities. This public register allows donors, funders, and regulators to check charitable status, review governing documents, and access published accounts.
In the United States, founders typically establish a non-profit corporation and then apply for tax-exempt recognition under section 501(c)(3) of the Internal Revenue Code.
Across continental Europe, associations and foundations are the dominant models, while international NGOs may register under specific national legislation designed for cross-border activity.
Every jurisdiction also requires governing documents that set out the organisation’s charitable purposes, outline how trustees or directors are appointed, and establish rules for oversight and dissolution. These documents — whether called a constitution, trust deed, bylaws, or articles of incorporation — must meet regulatory standards. For example, the IRS requires asset-dedication and charitable-purpose clauses, while the UK Charity Commission mandates provisions around public benefit and trustee duties.
Registration is the final step before operations can begin. In the UK, charities are required to register with the Charity Commission once their income passes a set threshold. In the US, non-profits are required to register at both federal and state levels, with the IRS granting tax-exempt recognition and many states requiring charitable solicitation licences. Other countries have equivalent requirements, often involving both tax authorities and ministries of justice or interior.
Setting up is only the first step; running a charity requires ongoing compliance with governance standards, financial reporting, and regulatory obligations. Boards and executive teams must ensure transparency, safeguard beneficiaries, and demonstrate impact year after year.
Charitable Companies Limited by Guarantee
There are many types of charity. One of the most common UK legal forms is the charitable company limited by guarantee. This structure is used when founders want the advantages of incorporation — such as limited liability for members and a separate legal personality — combined with charitable status.
Unlike profit-making companies, a charity limited by guarantee does not have shareholders. Instead, it has members who act as guarantors, agreeing to contribute a nominal sum (often £1) if the organisation is wound up. This ensures protection for trustees and members while keeping personal financial risk minimal.
A registered charity limited by guarantee must comply with both company law and charity law. It is regulated by Companies House under the Companies Act 2006 and by the Charity Commission under the Charities Act. This dual regulation brings extra reporting obligations — including annual returns and accounts to both bodies — but also provides greater transparency and credibility.
The governing document for this structure is typically a set of articles of association, which must align with charity law and clearly set out the charitable purposes, rules for trustee appointment, and procedures for financial management.
This model is often chosen by charities that plan to employ staff, enter into contracts, or own property, as incorporation provides the legal capacity to operate with more complexity. It is particularly popular for organisations delivering services at scale or receiving significant grant funding.
Governing Documents and Constitutions
Every charity or non-profit must be founded on a governing document. This is the legal blueprint that sets out the organisation’s charitable purposes, its rules for decision-making, and the responsibilities of trustees or directors. Regulators view the governing document as the central reference point for ensuring accountability and compliance.
Different jurisdictions use different terms. In the United Kingdom, most charities adopt either a charity constitution (common for associations), a trust deed, or articles of association for charitable companies. In the United States, non-profit corporations establish bylaws alongside their articles of incorporation. In other regions, documents may be called statutes, charters, or foundation rules, but the function is the same: to define how the organisation operates in law.
A governing document typically covers:
The charity’s name and charitable objectives
How trustees or directors are appointed and removed
Rules for meetings and decision-making
Financial management and reporting requirements
Safeguarding, conflict of interest, and dissolution provisions
Without a clear and compliant governing document, a charity cannot register with regulators or access benefits such as tax exemptions and fundraising approvals. Drafting this document carefully — and tailoring it to the right legal form — is one of the most critical early steps in establishing a sustainable organisation.
For readers seeking a deeper dive into UK-specific legislation, including the Charities Act 2022 and Companies Act 2006, we have prepared a dedicated guide: Legal and Regulatory Requirements for UK Charities.
Governance
Strong governance is one of the most important elements in building a credible charity or non-profit. It ensures that resources are used responsibly, decisions are made transparently, and the organisation remains accountable to its donors, regulators, and, most importantly, its beneficiaries.
At its core, governance defines the role of trustees or directors, who carry fiduciary duties that vary by jurisdiction but generally include acting with care, loyalty, and integrity. A well-composed board brings together diverse skills and perspectives, supported by clear policies on conflicts of interest, safeguarding, financial management, and ethical conduct.
Effective governance also requires transparency and accountability. Publishing annual reports, conducting independent audits, and engaging stakeholders in decision-making builds trust and strengthens long-term sustainability. Risk management and compliance, including data protection and regulatory obligations, must also be embedded within governance frameworks from the outset.
For a deeper exploration of governance principles — including accountability, transparency, ethical leadership, and building stakeholder confidence — see our dedicated article: Governance in Charities and Non-Profit Organisations.
Boards that treat compliance as part of their governance cycle demonstrate maturity to funders and regulators. Book a free consultation to review your board’s governance readiness and strengthen your charity’s oversight practices.
Compliance and Regulation
Charities and non-profits operate within a complex regulatory environment that is designed to ensure integrity, protect beneficiaries, and build public trust. Compliance is not only a legal obligation but also a vital enabler of credibility with donors, partners, and regulators.
The scope of compliance depends on jurisdiction and activities. In the United Kingdom, charities must comply with the Charities Act, report to the Charity Commission, and meet obligations under data protection and employment law.
In the United States, compliance involves maintaining 501(c)(3) status with the Internal Revenue Service, filing annual Form 990 returns, and often registering with state authorities to solicit donations. In the European Union and other regions, national laws regulate registration, fundraising, and reporting, often supplemented by data protection requirements such as the General Data Protection Regulation (GDPR).
Key compliance areas typically include:
Fundraising regulations: securing permission to solicit donations, observing restrictions on lotteries and gaming, and ensuring transparency in donor communications.
Tax compliance: meeting obligations for income, payroll, and sales taxes while also claiming available exemptions and benefits.
Employment law: adhering to minimum wage, benefits, and workplace safety standards for staff, and clarifying the legal status of volunteers.
Data protection: safeguarding personal information under frameworks such as GDPR in Europe or CCPA in California.
Reporting and disclosure: publishing annual reports and financial statements, often subject to audit depending on income thresholds.
Non-compliance carries significant risks, including the loss of tax-exempt status, reputational damage, and potential legal liability for trustees and directors. By establishing robust policies and seeking expert advice where necessary, organisations can embed compliance into their operations from the start, reducing risks and enabling the board to focus on achieving the mission.
Strategy and Planning
A well-defined strategy and business plan is what transforms a charity or non-profit from good intentions into sustained impact. While the mission provides purpose, the strategy provides direction, ensuring that activities, resources, and governance are aligned to achieve meaningful outcomes.
At the outset, organisations should develop clear vision and values statements. These create a framework for decision-making, help attract like-minded supporters, and guide the culture of the board, staff, and volunteers. Strategic plans should then translate these high-level principles into concrete goals, supported by measurable outcomes and key performance indicators.
Strategic planning is not a one-time exercise. Regular reviews enable organisations to assess whether their programmes remain relevant, whether resources are being used effectively, and whether new challenges or opportunities require adaptation. In a changing environment, this discipline provides both agility and resilience.
Many non-profits also choose to align their objectives with broader global frameworks such as the United Nations Sustainable Development Goals (SDGs). This approach not only reinforces the organisation’s legitimacy but also positions it to collaborate more effectively with international funders, governments, and partner organisations.
Ultimately, strategy and planning allow charities and non-profits to link their mission with execution. They provide a roadmap that makes the purpose actionable, demonstrates accountability to stakeholders, and builds confidence that the organisation can deliver long-term value to the communities it serves.
Funding and Finance
Securing sustainable funding is one of the greatest challenges for any charity or non-profit. A strong financial model underpins the delivery of programmes, ensures stability, and builds trust with regulators and donors alike. Financial resilience depends on both diversifying income sources and maintaining robust financial management practices.
Funding sources typically include grants from governments and foundations, donations from individuals, sponsorships from corporate partners, and in some cases, trading income or membership fees. In the United Kingdom, charities can also claim Gift Aid to increase the value of individual donations, while in the United States, 501(c)(3) status allows contributions to be tax-deductible. Across Europe and other jurisdictions, similar tax relief schemes incentivise giving and support the financial sustainability of the sector.
Good financial stewardship requires more than raising money. Boards should establish a reserves policy to manage cash flow and protect against funding shocks, supported by transparent banking and investment arrangements. Where organisations generate income through trading or commercial ventures, it is critical to comply with local tax rules such as the US Unrelated Business Income Tax (UBIT) or equivalent provisions elsewhere.
Transparency in financial reporting is equally important. Annual accounts and audits, where required, demonstrate accountability and reassure funders that resources are used responsibly. Publishing clear, accessible reports also strengthens credibility with the public and helps secure future funding.
Sound funding and finance practices do more than protect the bottom line. They provide the foundation for growth, enable strategic investment in programmes, and give stakeholders the confidence that the organisation is capable of delivering long-term impact.
Operations and Delivery
Defining a mission and securing funding are only the starting points; what matters most is how a charity or non-profit delivers on its commitments. Operations are where strategies become programmes and values translate into services that directly benefit communities.
Effective programme design begins with a clear understanding of beneficiary needs. Organisations should involve communities in shaping initiatives to ensure that services are relevant, inclusive, and sustainable. This participatory approach strengthens trust and improves outcomes, as beneficiaries become partners rather than passive recipients.
Volunteer engagement is another cornerstone of delivery. Charities and non-profits rely heavily on volunteers, whose skills and commitment amplify impact. Clear volunteer management policies, including recruitment, training, and safeguarding, not only improve programme effectiveness but also protect both the organisation and its people.
Partnerships and collaborations extend the reach and capacity of non-profits. Working with local authorities, businesses, or international NGOs can provide access to resources, expertise, and new networks. Strong partnerships also reduce duplication of effort and enable organisations to deliver at scale.
Operational resilience must underpin all delivery. This includes risk management, business continuity planning, and safeguarding policies that protect vulnerable groups. By preparing for disruptions — whether financial, operational, or reputational — organisations can continue to deliver services reliably, even in times of crisis.
People and Culture
Behind every successful charity or non-profit are the people who drive its mission forward. Trustees, staff, and volunteers bring the skills, energy, and commitment that make programmes possible, and the culture they create determines how effectively the organisation can deliver on its goals.
Recruiting and supporting trustees is a first priority. A strong board combines governance expertise with lived experience and community insight. Equally important is ensuring that trustees are given the training and resources they need to carry out their duties effectively.
Staff and volunteers form the operational backbone of most non-profits. Clear recruitment processes, fair employment practices, and ongoing training contribute to stability and professionalism. Volunteer engagement requires just as much care, with policies that clarify expectations, safeguard participants, and recognise their contribution.
A commitment to diversity, equity, and inclusion strengthens culture and improves outcomes. By bringing together people with different backgrounds and perspectives, organisations not only reflect the communities they serve but also foster more innovative and responsive decision-making.
Culture is also shaped by values. Ethical leadership, safeguarding practices, and a focus on wellbeing create an environment where people feel safe, respected, and motivated. When staff and volunteers feel connected to the mission and confident in the organisation’s integrity, they are more likely to remain engaged and deliver their best work.
Communications and Engagement
Clear and consistent communication is essential for charities and non-profits to build trust, attract support, and demonstrate accountability. The way an organisation tells its story shapes how beneficiaries, donors, regulators, and the wider public perceive its purpose and effectiveness.
Branding and messaging should reflect the mission and values of the organisation. A compelling narrative not only explains what the charity does but also shows why it matters, using stories and evidence to highlight real-world impact. Donor engagement often relies on this storytelling to connect contributions with outcomes.
Transparency is another cornerstone of effective communication. Publishing annual reports, financial statements, and programme updates reassures stakeholders that resources are being managed responsibly. Open communication also strengthens credibility with regulators and funders.
Digital tools have become central to engagement strategies. Websites, social media, and email campaigns provide cost-effective channels to reach new audiences, while donor management systems and customer relationship management (CRM) platforms enable more personalised interaction. Used well, these tools help organisations maintain long-term relationships with supporters and respond quickly to emerging issues.
Engagement is not one-directional. Involving beneficiaries, volunteers, and funders in dialogue creates stronger connections and helps organisations refine their programmes. Charities that listen and respond to their communities often achieve higher levels of trust and participation.
Impact and Evaluation
Charities and non-profits are expected not only to deliver services but also to demonstrate the difference they make. Measuring impact provides evidence that resources are being used effectively, builds trust with funders and beneficiaries, and informs future strategy.
Many organisations use a theory of change or logic model to link activities to outcomes. This approach helps clarify how programmes create the intended results and provides a framework for monitoring progress. Indicators and key performance measures then allow boards and funders to assess whether goals are being achieved.
Regular evaluation strengthens accountability. Annual reports, impact assessments, and independent reviews provide transparency, while also highlighting lessons learned and opportunities for improvement. In some jurisdictions, regulators require charities to report on public benefit or submit detailed performance statements as part of compliance.
Impact measurement is not limited to external reporting. Internally, data on outcomes, beneficiary feedback, and programme effectiveness can guide decisions about where to focus resources, how to refine delivery, and when to scale initiatives.
Technology and Systems
Technology is increasingly central to the effectiveness and sustainability of charities and non-profits. The right systems improve efficiency, enhance transparency, and strengthen relationships with donors, beneficiaries, and partners.
Donor and membership management platforms, often referred to as customer relationship management (CRM) systems, allow organisations to track contributions, manage communications, and personalise engagement. These tools also provide valuable data that can inform fundraising strategies and measure donor retention.
Digital fundraising platforms have expanded opportunities for giving, from online donation pages to peer-to-peer campaigns and crowdfunding. While these tools increase reach, they also introduce compliance requirements, such as meeting data protection standards and adhering to fundraising regulations across multiple jurisdictions.
Cybersecurity has become a critical concern. Charities often handle sensitive personal and financial information, making them targets for fraud and data breaches. Establishing strong security protocols and complying with regulations such as GDPR or CCPA protects both the organisation and its stakeholders.
Internally, collaboration tools support governance and operations, particularly where boards and teams work remotely or across borders. Document-sharing systems, video conferencing, and secure board portals enable effective oversight and decision-making.
Technology is not a substitute for mission, but when integrated thoughtfully, it enhances delivery, accountability, and the organisation’s ability to adapt to changing environments.
Cyber risk is now one of the fastest-growing threats facing charities. Download our Cyber and Data Security Checklist for Charities to strengthen resilience and embed digital protection across your governance framework.
International Considerations
Many charities and non-profits operate across borders, whether by delivering services abroad, raising funds internationally, or partnering with overseas organisations. Expanding beyond a single jurisdiction creates new opportunities but also introduces complex legal, financial, and cultural challenges.
A first step is understanding registration requirements in each country where activities are planned. Some jurisdictions require foreign NGOs to obtain local authorisation before fundraising or delivering programmes, while others impose restrictions on the flow of funds across borders. In the United States, organisations must also comply with Office of Foreign Assets Control (OFAC) rules that regulate transactions in certain regions.
Tax and currency issues are another layer of complexity. Donations received internationally may not always qualify for local tax relief, and currency fluctuations can create financial risks. Careful financial planning and consultation with advisors are essential to protect both the organisation and its beneficiaries.
Safeguarding standards must also be adapted to international contexts.
Protecting vulnerable populations requires awareness of local laws, cultural norms, and risks specific to regions of operation. Many international NGOs also adopt global safeguarding frameworks to ensure consistent protection regardless of location.
Cross-border work also demands sensitivity to culture and context. Building strong local partnerships not only improves programme relevance but also ensures compliance with national regulations and strengthens community trust.
Conclusion
Establishing a charity or non-profit is more than an act of goodwill. It requires clear purpose, a sound legal framework, strong governance, and the ability to demonstrate impact with transparency and integrity. Each of the themes explored — from strategy and funding to culture, technology, and international operations — shapes how effectively an organisation can serve its beneficiaries and sustain itself over time.
For founders, trustees, and executives, the task is to balance ambition with responsibility. Those who invest the time to understand their regulatory environment, build resilient structures, and align operations with mission are better placed to earn the trust of donors, regulators, and communities alike.
Starting well is only the beginning. The long-term success of a charity or non-profit depends on how consistently it can translate its mission into meaningful outcomes, adapt to change, and remain accountable to the people it serves.
👉 Next Steps for Trustees and Founders
If you want to go further:
Benchmark your governance practices with our Charity Governance Maturity Assessment.
Explore the Charity Risk Taxonomy to understand the broader risks your board must oversee.
Subscribe for weekly insights tailored to trustees and board members.
Book a free consultation to review your charity’s compliance cycle and governance readiness.
About the Author: Julien Haye
Managing Director of Aevitium LTD and former Chief Risk Officer with over 26 years of experience in global financial services and non-profit organisations. Known for his pragmatic, people-first approach, Julien specialises in transforming risk and compliance into strategic enablers. He is the author of The Risk Within: Cultivating Psychological Safety for Strategic Decision-Making and hosts the RiskMasters podcast, where he shares insights from risk leaders and change makers.
Disclaimer
The information provided in this article is for general informational purposes only and does not constitute professional advice or an official opinion. While efforts have been made to ensure the accuracy and completeness of the content, Aevitium LTD does not accept any responsibility for any errors or omissions. Readers are encouraged to consult with professional advisors or directly with the Charity Commission for specific guidance and assistance tailored to their individual circumstances.
