So you want to start a charity? Part one – Before you start:
Is the start of the new decade pushing you to pursue a social cause? Worried about the bushfires and want to do something to help? Noticed that your local community is missing key services?
You might be considering starting a charity. That’s fantastic – charities have a huge impact on the public, provide help to people in need and build stronger communities. Many people look at the work that is being done (or not done) by charities and want to start their own.
Here’s some things to consider before you get the ball rolling.
What are you trying to achieve?
Purpose is at the core of the charitable sector. The purpose of an organisation is the reason why it exists, or its mission. Everything – including a charity’s funding, government recognition and activities – flows from its purpose. If you want to start a charity, you should have a clear purpose, and the ability to articulate your vision, goals and success markers.
The best purpose statements are usually brief and broad. For example:
- “To provide for business regrowth and sustainability in bush fire affected areas”;
- “To improve access to health care services in Western Melbourne”; or
- “To research a cure for pancreatic cancer.”
Don’t worry about formalising the language – lawyers and consultants can help with that – just articulate what you want to achieve.
Is a new charity necessary to achieve this purpose?
With over 50 000 registered charities – not including the estimated 550 000 not-for-profit organisations that are not registered charities – there is a good chance an existing charity has a similar purpose to your proposed new charity. A little research on the ACNC Charity Register will help you assess whether you will be duplicating existing services or competing for limited funds against an established charity.
Given the establishment costs and the ongoing administrative burden of maintaining a charity, you don’t want to reinvent the wheel. Consider whether your resources might be better used to support an existing organisation.
That said, one of the strengths of this sector is its diversity and ability to provide tailored, local and unique responses to a broad range of social needs. We help new charities get established all the time that are working with overlooked individuals, meeting an unmet need or have an innovative way to achieve their purpose. If you’ve assessed existing offerings and have a unique value proposition, then keep reading.
Is your purpose a “charitable” purpose?
Your organisation’s eligibility for tax concessions will depend mainly on its purpose.
Only organisations that have charitable purposes can register as charities with the ACNC and receive charitable tax concessions. The Charities Act 2013 (Cth) lists charitable purposes, including advancing health, education, social or public welfare and religion.
Some charitable purposes, but not all (as well as some non-charitable purposes), also allow organisations to receive tax deductible donations from the public. This is valuable, as it improves your ability to attract donations and may also enable you to access certain government or philanthropic grants.
Even if your purpose isn’t charitable, some ”mere” not-for-profits can still access income tax exemption and other tax concessions.
What structure will meet your needs?
The legal structure of a charity may seem a bit dull, but it has implications for how your charity is governed, its activities and who it reports to.
Broadly, charity structures fall into two groups – corporate entities (e.g companies or associations) and fundraising entities (i.e trusts and funds).
- Corporate entities are good for charities that want to undertake activities, deliver services, hire staff and govern its own affairs. Organisations such as homeless shelters, schools and religious bodies fall into this group.
- Fundraising entities are (as the name indicates) more for raising funds to direct towards a charitable purpose. Fundraising entities are generally less regulated than corporate, and are useful for fundraising to support another charity that will actually carry out the work. This includes private and corporate foundations and charitable trusts.
Show me the money
You have a great idea, a clear purpose, a unique value proposition and an idea of how to start – but without money, none of this will happen. All new organisations need to plan both their initial and ongoing funding. Depending on the size of your proposed operation it might be worth investing in expert strategic and business planning to understand what funding is available and how you can access it.
Traditionally, charities have relied on government, donations from individuals, corporate sponsorship and fundraising to keep the doors open. As these funding pools become more competitive, some charities are using commercial activities and social enterprises to fund their work.
Be realistic about what it will cost to start your charity, assess your funding sources and develop a plan to raise the necessary funds that will sustain your organisation beyond the start-up phase.
Planning ahead and asking the hard questions early will set up your charity for success. Expert advice can help you to understand the tax concessions and endorsements you may be eligible for, avoid making extensive and complicated changes to your structure down the track and develop a realistic strategic and business plan for your charity.
Moores is one of only a few legal practices with a team dedicated to providing specialist advice to charities and not-for-profits. We provide strategic advice on establishment, governance, structuring and tax to clients from all over the charitable sector – including disability services, educational institutions, faith-based bodies and overseas aid organisations.
If you have a purpose to pursue, we’re here to help. Please do not hesitate to contact us.
Made a New Year’s resolution to make an impact on the world? This is part one of our ‘So you want to start a charity’ series.