Legal structures and organisational forms

Trustees operate within a formal set of rules, sometimes called a constitution or governing document. The governing document defines the legal structure of the organisation.

There are four common types of legal structure and a number of other, less common, legal forms. The most common are:

• An unincorporated association – this is a simple membership structure and is often suitable for smaller organisations with lower risk activities and a membership
• A Trust – this is a traditional structure often used by grant making trusts or smaller service providing organisations that generally do not have a membership.
• Company Limited by Guarantee – this type of structure is registered with Companies House and is often suitable for larger organisations that employ staff, own buildings and have significant contracts or other responsibilities.
• Industrial and Provident Society (IPS) – this is a corporate body like a company but registered with the Financial Services Authority

Companies Limited by Guarantee and IPSs are legal entities in their own right. This means that any agreements or contracts are held in the name of the company. This helps limit the financial liability of trustees (although it does not cover every potential liability). 

Companies and IPSs must comply with a number of regulatory requirements, including filing information with their regulator and preparing accounts according to special rules.

Unincorporated Associations and Trusts are relatively easy to set up and administer, but they have no independent legal identity, agreements, contracts and leases are held in the names of the trustees personally. Trustees could, potentially, be held personally liable if the organisation could not meet its obligations.

The Charities Act 2006 contains provisions for a new form of corporate structure, the Charitable Incorporation Organisation (CIO). At the time of writing, it is not clear when this will be available so this guidance does not deal with them.

For more information on Governance and Legal Structures go to our Get Legal website.