1.1 Legal Structures
In order to establish any type of voluntary organisation you’ll first have to decide on a suitable legal structure for it to adopt. This isn’t whether your organisation will be a charity or regard itself as a social enterprise, but the legal framework as defined in your governing document (please see section 1.7) and to which you must adhere.
The key decision in selecting a legal structure is whether you wish to be unincorporated or incorporated. In Scotland, 61% of registered charities (July 2018) adopt an unincorporated legal structure which, as a consequence, exposes their charity trustees to potential risks. The table below describes the key differences between unincorporated and incorporated organisations.
Although many small organisations operate just fine with an unincorporated structure – perhaps their sole liability is the weekly £7 hall let – the consequences can be catastrophic when things go wrong as members have unlimited liability. Careful consideration should therefore be given when deciding on whether to adopt an unincorporated or incorporated legal structure. Common types of each structure are detailed below.
Unincorporated Legal Structures
Incorporated Legal Structures
For a full comparison of common third sector legal structures, please see the Office of the Scottish Charity Regulator’s (OSCR) Legal Forms Factsheet and the relevant pages of our Getting Started section.
It’s not necessary for your organisation to be a charity - in fact the Office of the Scottish Charity Regulator (OSCR) estimates that approximately only 50% of Scotland’s third sector organisations are charities – and any application for charitable status should be considered carefully beforehand (please see section 1.9). As illustrated in the table above though, one significant benefit of charitable status is that it offers a route to establish an incorporated organisation in order to protect the charity trustees.
There are currently 24,485 charities in Scotland (July 2018). Despite only being introduced in 2011, the SCIO model already accounts for 3,498 (14%) of this figure and approximately 50% of all applications for charitable status are SCIOs. The table opposite illustrates that the sector is recognising the importance of incorporating and in particular, the SCIO as a vehicle for doing do.
1.0 Getting Started
1.1 Legal Structures
1.2 Unincorporated Association
1.4 Scottish Charitable Incorporated Organisation
1.5 Limited Company
1.6 Community Interest Companies
1.7 Developing a Governing Document
1.8 Writing your Organisations Purposes
1.9 Applying for Charitable Status
1.10 Applying for Company Status
1.11 Applying for CIC Status
2.0 Developing and Growing
3.0 Taking on an Asset
4.0 What is Social Enterprise
7.0 Dissolving an Organisation