How to start a nonprofit organisation in the UK (with types)

By Indeed Editorial Team

Published 4 July 2022

The Indeed Editorial Team comprises a diverse and talented team of writers, researchers and subject matter experts equipped with Indeed's data and insights to deliver useful tips to help guide your career journey.

Starting a nonprofit organisation is an excellent way to create a company that benefits society, or more specifically, one that doesn't put directors and stakeholder profits as its main priority. There are many processes to undertake before you can start operating a nonprofit organisation, from considering the various legal structures to deciding whether your organisation is going to be charitable. Not-for-profit organisations are business entities, so they require diligent planning on your part. In this article, we outline what a nonprofit business is and look at how to start a nonprofit organisation.

Related: What is it like to work for charities?

How to start a nonprofit organisation in the UK

Once you've established a cause you're aiming to support, take the time to research how to start a nonprofit organisation in the UK. Below are steps you can take to start your own nonprofit business:

1. Select the right organisational structure

There are a number of different organisational structures for you to choose from, depending on the needs of your organisation. Choosing the right structure creates a usable framework that guides you on how to run your organisation. Co-operatives, mutual aid groups and trusts are lesser-used structures but are still viable for these types of businesses. The most commonly used structures are:

Unregistered charity

Typically, charity laws bind unregistered charities, subjecting them to the Charity Commission's regulations. Since you may not have access to the benefits of a registered charity and lack a charity number, it's a good option to register if you intend to run a charity in the future. Trustees are responsible for operating unregistered charities. Unregistered charities are simple to set up, and once you draft a constitution, you can begin operating.

Related: What are business legal structures? (With examples)

Community interest company (CIC)

Community interest companies are structures that fall under the purview of Companies House and the CIC regulator. CICs benefit the public through their actions, and any profits made by the organisation help to provide a tangible benefit to the community. CIC registration is fast and usually completed in less than a week. In a CIC, founders can receive payments and control the organisation's operations, unlike in a charity. A CIC is not eligible for any tax breaks that charities receive, and there are fewer grants available for them. Registration costs £27 online or £35 via post.

Charitable incorporated organisation (CIO)

Charitable incorporated organisations (CIOs) are legal structures that fall under the jurisdiction of the Charity Commission. CIOs give organisations the various benefits of being a registered charity without registering as a company under Companies House. CIOs are also eligible for several tax breaks that CICs can't use, and they aren't required to hold a bank account with £5,000 in it, unlike other charitable companies. Registering a CIO with the Charity Commission takes time, which can be four to six months.

Community group or unincorporated association

A community group or unincorporated association is probably the easiest structure to use if you're setting up a nonprofit organisation. There's no requirement to register with any bodies, and you can easily upgrade your organisation into a constituted community group by drafting a constitution. This is an excellent option if you intend to run your organisation using volunteers. If there are any debts or contractual obligations, individual members are responsible for them.

2. Perform market research

Ideally, a nonprofit organisation responds to markets similarly to a regular company. That means you can perform market research to find a suitable area, niche or specialism for your organisation to function in. Many online resources are available to help with this, such as social media analytics and business reports to help give you a better understanding of your desired market.

A good place to begin your research is to look at other organisations or even potential competitors to understand how they reach their audience, grow clients and succeed. This might also include looking at how they earn donations, as this could help you find the right message for your audience.

3. Outline your goals and purpose

Establish your nonprofit organisation with a number of goals or a specific purpose in mind. This purpose may benefit society or be charitable in nature so that your efforts give back to the community in some way. You can consider your core values and align them with your nonprofit organisation to help you understand the overall meaning of your work. The focus here is creating an open plan for your organisation and conjuring up a vision for your organisation's future.

Related: How to create a personal SWOT analysis in 5 steps

4. Draft a mission statement

A mission statement outlines your overall purpose as a nonprofit organisation. It also touches upon your core values as an organisation and helps guide decisions. Mission statements are brief in nature and normally found in documentation or policies that highlight organisational goals.

Example: Our mission is to create a platform for young, local artists and performers to showcase their talent and bring value to the community.

5. Create a business plan

Business plans are official documents used to declare the goals and activities of an organisation. Take time to research and outline your nonprofit strategy and ensure it covers all aspects of the organisation. The business plan can help convince donors or local council officials of the effectiveness of your organisation and its merit. Make your business plan wide-reaching and specific, incorporating core values and the specific steps you intend to take to get there. It can also include the communities you aim to help and why they could benefit from your organisation.

Related: Guide: what is strategic planning? (With benefits and steps)

6. Register your nonprofit organisation

Register with the appropriate regulatory body if you intend to set up a nonprofit organisation. Community interest companies, also known as CICs, register with Companies House and are to include a constitution and an asset lock. Charitable Incorporated Organisations, or CIOs, register with the Charity Commission instead.

If you have a nonprofit organisation that is small in scale, registering with a regulatory body isn't necessary, but almost all nonprofit organisations require registration with the Charity Commission if they declare income that exceeds £5,000 per year. CIOs are to register even if they earn less than £5,000 per year.

7. Set up a bank account

Once you've established your nonprofit organisation, set up a bank account for it. Most funders and donors won't be able to provide funds to an individual's bank account, so setting up one specifically for your organisation is the best solution. It also offers more transparency surrounding donations and monitors spending within the organisation. Some banks offer many services tailored specifically to various types of nonprofit organisations. Taking the time to research which banks offer the best service for your organisation can help with controlling finances.

8. Find income streams

Reaching the right audience helps your nonprofit organisation receive funding through a number of channels. Depending on the type of organisation you've set up, you might benefit from:

  • selling a product or service

  • drafting funding bids for companies and trusts

  • seeking donations from donors

  • performing fundraising activities

Related: What is financial modelling for businesses? (With examples)

9. Market your nonprofit organisation

Once you've set up your nonprofit organisation, use appropriate marketing to reach the widest possible audience. Setting up an online presence through social media platforms is a great place to start. Using Twitter or Instagram to find like-minded individuals who may be able to help your cause is free and opens up your organisation to a huge potential audience. Alternatively, speaking with other charities and local news outlets can help get your brand recognised and spread the message of your work. Ultimately, your goal is to inform as many interested parties as possible about your nonprofit organisation.

Related: Marketer skills: definition and examples

What is a nonprofit organisation?

A nonprofit organisation is a wide-reaching term for an independent organisation that focuses on something other than increasing profits for directors, investors and stakeholders. There are many types of nonprofit organisations depending on their activities. In general, a nonprofit organisation is not a legal structure, but they may choose a legal structure to follow based on whether:

  • Voting members govern the organisation.

  • The organisation is to become incorporated.

  • The organisation intends to be charitable.

Please note that none of the businesses mentioned in this article are affiliated with Indeed.

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