Charities can adopt a number of different legal structures. The most basic is to setup as an unincorporated charity. This is often where charities start, then as they grow they will move away to more sophisticated structures. The principal advantage of an unincorporated charity is that they are low cost due to their simplicity. The disadvantage is that as a charity grows the structure does not allow the charity to have it’s own legal identity separate to that of the trustees. This can be particularly unsuitable if the charity employs people.

A Charitable Incorporated Organisation (CIO) is a relatively new type of charity that has been introduced. In all instances they are now preferable to forming a Charitable Company Limited by Guarantee. There is a program of conversions taking place to allow companies limited by guarantee to convert. A CIO provides a legal identity to the charity, so it can own assets and sign contracts in its own name. Furthermore, it limits the liability that the trustees can be exposed to should the charity ever be faced with a law suit.

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