Charity structures in plain English

A jargon-free guide to the legal structures used by charities in England and Wales — CIOs, charitable companies, trusts, unincorporated associations, and how they differ from CICs and social enterprises.

By Plinth Team

TL;DR: Every charity has a legal structure that determines how it is governed, who is liable if things go wrong, and which regulators it answers to. The main forms are CIOs (Charitable Incorporated Organisations), charitable companies limited by guarantee, charitable trusts, and unincorporated associations. The critical distinction is between incorporated structures (which give the charity its own legal identity and protect trustees from personal liability) and unincorporated structures (which do not). CICs and social enterprises are often confused with charities but are different things entirely. This is one of those topics that sounds technical but has real, practical consequences for everyone involved.

Why this matters

When you join a charity, you inherit its legal structure — and that structure shapes what the organisation can do, how decisions are made, who carries risk, and what happens when things go wrong.

If your charity is unincorporated, the trustees may be personally liable for debts and legal claims. If it is a charitable company, it must file with both the Charity Commission and Companies House. If it is a CIO, it answers only to the Charity Commission. These are not abstract legal distinctions — they affect employment contracts, property ownership, grant agreements, and the personal exposure of every trustee.

Most people in the sector have a vague sense that charity structures matter, but surprisingly few can explain the differences clearly. This article gives you what you need.

The 5 things to know

1. Incorporation is the most important concept to understand

The single most important distinction in charity structures is whether the charity is incorporated or unincorporated.

An incorporated charity has its own legal personality — it exists as a legal entity separate from the people who run it. It can own property, enter into contracts, employ staff, and sue or be sued in its own name. Crucially, if the charity incurs debts or faces legal action, the trustees' personal assets are generally protected.

An unincorporated charity has no separate legal identity. It is essentially a group of people (the trustees) acting together for a charitable purpose. Contracts, property, and legal claims are held in the names of individual trustees. If things go wrong financially, trustees can be personally liable.

The incorporated forms are:

  • Charitable Incorporated Organisation (CIO)
  • Charitable company limited by guarantee

The unincorporated forms are:

  • Charitable trust
  • Unincorporated association

GOV.UK's guidance on choosing a charity structure (published by the Charity Commission) sets out the options and their implications clearly. The Charities Act 2011 provides the legislative framework for charity structures in England and Wales.

2. CIOs are the modern default for new charities

The Charitable Incorporated Organisation (CIO) was introduced by the Charities Act 2006 and became available for registration from 2013. It was specifically designed to give charities the benefits of incorporation without the burden of dual regulation.

Key features:

  • Incorporated: the CIO has its own legal personality and trustees have limited liability
  • Registered only with the Charity Commission: unlike charitable companies, CIOs do not need to register with Companies House, file at Companies House, or comply with company law
  • Two types: a foundation CIO where only the trustees are members, and an association CIO where there is a wider membership that can vote on certain matters (such as appointing trustees and amending the constitution)
  • Governed by a constitution using a model provided by the Charity Commission

CIOs have become the most popular structure for new charities. They offer the liability protection of a company without the administrative overhead of dual filing. For most new charities that plan to employ staff, hold property, or enter into contracts, a CIO is the natural choice.

For a deeper dive, see our complete guide to CIOs.

3. Charitable companies are the older incorporated form — still very common

Before CIOs existed, the standard way to create an incorporated charity was to set up a company limited by guarantee and register it as a charity. Thousands of existing charities use this structure, including many of the sector's largest organisations.

Key features:

  • Incorporated: the company has its own legal personality and members' liability is limited to a nominal guarantee (usually £1)
  • Dual regulation: charitable companies must comply with both charity law (Charity Commission) and company law (Companies House). This means filing annual accounts and returns with both regulators
  • Governed by articles of association (under the Companies Act 2006) and subject to company law duties as well as trustee duties
  • Directors are the charity trustees: the people who serve as company directors are also the charity's trustees, meaning they have duties under both regimes

The main disadvantage of a charitable company compared to a CIO is the dual regulation burden. Trustees must understand and comply with two sets of legal obligations. However, charitable companies are a well-understood structure with decades of case law and practice behind them.

Many established charities remain as charitable companies rather than converting to CIO form, partly because conversion can be complex (involving the transfer of assets, contracts, and employment) and partly because the dual regulation, while burdensome, is manageable for organisations with adequate administrative capacity.

4. Charitable trusts and unincorporated associations are simpler but riskier

Charitable trusts are the oldest form of charity. A charitable trust is created by a trust deed (or sometimes a will) that appoints trustees to hold and manage assets for charitable purposes.

Key features:

  • Unincorporated: no separate legal personality. Property and assets are held in the names of the trustees
  • Governed by a trust deed and general trust law
  • Trustees have personal liability for the charity's debts and obligations (though insurance can mitigate this)
  • Typically used for grant-making trusts and foundations where the charity holds an endowment and distributes income, rather than employing staff or entering into complex contracts
  • Simple to set up but inflexible — amending a trust deed can be difficult, sometimes requiring a Charity Commission scheme

Unincorporated associations are groups of people who come together for a common purpose under a constitution or set of rules.

Key features:

  • Unincorporated: no separate legal personality. The association is essentially its members acting collectively
  • Governed by a constitution (or rules) agreed by the members
  • Trustees/committee members have personal liability
  • Common for small community groups, sports clubs, and local voluntary organisations that do not employ staff or hold significant assets
  • Charities with income over £5,000 can register with the Charity Commission in this form, but many small unincorporated associations operate below the registration threshold

For either unincorporated form, the key risk is personal liability. If the charity enters into a contract it cannot fulfil, or faces a legal claim, the trustees or committee members may be personally liable. This is why the Charity Commission generally advises charities that employ staff or hold significant assets to incorporate.

5. CICs and social enterprises are NOT charities — but they are constantly confused

Two organisation types regularly get mixed up with charities:

Community Interest Companies (CICs) are companies designed for social enterprises. They are registered with Companies House and regulated by the CIC Regulator (part of Companies House), not the Charity Commission. CICs have an asset lock (ensuring assets are used for community purposes) and must file a community interest statement and an annual CIC report.

CICs are not charities. They cannot claim Gift Aid on donations, are not exempt from corporation tax, and are not on any charity register. They are a useful structure for organisations that want to trade for social purposes without taking on the full obligations of charitable status. There are over 37,000 CICs in England and Wales.

See our guide to Community Interest Companies for full detail.

Social enterprises are not a legal structure at all — "social enterprise" is a description of purpose, not a legal form. A social enterprise can be a charity, a CIC, a cooperative, a company limited by shares, or any other legal form. What makes it a social enterprise is that it trades for a social or environmental purpose rather than purely for private profit.

The confusion between charities, CICs, and social enterprises is one of the most persistent in the sector. The key questions are always: (1) what is the legal form? (2) is it registered as a charity? (3) which regulator applies?

Common misunderstandings

"All charities are the same legally." They are not. A CIO, a charitable company, a charitable trust, and an unincorporated association have fundamentally different legal characteristics, governance requirements, and liability profiles.

"Trustees are always protected from personal liability." Only if the charity is incorporated (as a CIO or charitable company). Trustees of unincorporated charities can be personally liable for the charity's debts and legal obligations. Even in incorporated charities, trustees can face personal liability if they act in breach of their duties.

"CIOs are always better than charitable companies." For new charities, CIOs usually make sense. But for existing charitable companies, converting is not always straightforward or necessary. And CIOs are relatively new — there is less case law and established practice compared to charitable companies. Some lawyers still recommend the charitable company form for complex or large organisations.

"A CIC is basically a charity with fewer rules." A CIC is a fundamentally different legal form with different tax treatment, different regulatory oversight, and different governance requirements. The asset lock provides some protection, but it is not equivalent to charitable status. Organisations that describe themselves as "a bit like a charity" when they are CICs are being imprecise at best.

"You can easily change your charity's structure." Converting from one structure to another — particularly from an unincorporated form to a CIO or from a charitable company to a CIO — involves transferring assets, novating contracts, TUPE-transferring staff, updating bank accounts, and potentially re-registering with the Charity Commission. It is doable but not trivial.

How it works in practice

When you encounter a charity for the first time — whether as a new employee, a funder conducting due diligence, or a partner organisation — one of the first things worth checking is its legal structure. You can find this on the Charity Commission register entry.

The structure tells you:

  • Who carries liability: are the trustees personally exposed, or does the charity have its own legal identity?
  • Where it files: does it report only to the Charity Commission (CIO, trust, unincorporated association) or also to Companies House (charitable company)?
  • How governance works: is it governed by a constitution (CIO, unincorporated association), articles of association (charitable company), or a trust deed (charitable trust)?
  • How flexible it is: can the governing document be amended relatively easily, or does it require a Charity Commission scheme?

In practice, the structure also affects practical matters like opening bank accounts (some banks are still unfamiliar with CIOs), entering into leases, applying for funding (some funders require applicants to be incorporated), and managing trustee recruitment.

If you work in a grant-making organisation, understanding structures is particularly important for due diligence. You need to know whether the organisation you are funding has the legal capacity to enter into a grant agreement, employ the staff it proposes to employ, and hold the assets it needs to hold.

What people disagree about

  • Should all charities be required to incorporate? Some argue that personal liability for trustees of unincorporated charities is an unacceptable risk that deters good people from serving. Others argue that requiring incorporation would impose unnecessary bureaucracy on very small groups.
  • Are CIOs working as intended? The CIO was designed to simplify charity governance. Some argue it has succeeded. Others point to teething problems — slow registration times at the Charity Commission, unfamiliarity among banks and landlords, and the relative lack of case law.
  • Should the CIC and charity structures be merged or aligned? Some argue that having both CICs and charities creates unnecessary complexity and that a single "social purpose organisation" structure would be cleaner. Others argue the distinction between charitable and non-charitable social enterprise is important and should be maintained.
  • Is the Charities Act 2011 due for modernisation? The Act consolidated earlier legislation but some practitioners argue it needs updating to reflect changes in the sector, including digital governance, hybrid working, and the growth of social enterprise.

What to read next

FAQs

Which structure should a new charity choose?

For most new charities that plan to employ staff, enter into contracts, or hold property, a CIO is the recommended starting point. It provides incorporation (liability protection) without the dual regulation burden of a charitable company. The choice between a foundation CIO (trustees only) and an association CIO (wider membership) depends on whether you want members beyond the trustee board to have voting rights. GOV.UK's guidance on setting up a charity sets out the decision process. For very simple arrangements — particularly grant-making from a fixed endowment — a charitable trust may still be appropriate.

What does "limited by guarantee" mean?

A company limited by guarantee is a type of company where the members (rather than shareholders) guarantee to contribute a nominal amount — usually £1 — if the company is wound up. This is the standard company form used by charities, because charities do not have shareholders or distribute profits. The guarantee provides a small safety net for creditors while limiting members' personal liability. It is distinct from a company limited by shares, which is the standard form for profit-making businesses.

Can a charity convert from one structure to another?

Yes, but it is a significant undertaking. The most common conversion is from an unincorporated form (trust or association) to a CIO, or from a charitable company to a CIO. The process typically involves creating the new entity, transferring assets, novating contracts, TUPE-transferring employees, updating bank accounts and registrations, and closing the old entity. The Charity Commission provides guidance on conversion, and legal advice is strongly recommended. The process can take several months.

What is the difference between a CIO and a CIC?

A CIO is a charity — it is established for exclusively charitable purposes, registered with the Charity Commission, and subject to charity law. It can claim Gift Aid and is exempt from corporation tax on charitable activities. A CIC is a company regulated by the CIC Regulator at Companies House — it has an asset lock and a community interest purpose, but it is not a charity, cannot claim Gift Aid, and does not receive charity tax exemptions. They are fundamentally different legal forms designed for different purposes, despite the superficial similarity in their names.