Step 4 Ready to apply?

Charities can take a number of legal forms. The legal form is the structure, which becomes a charity. Some of these structures are ‘unincorporated’ and some are ‘incorporated’.

The main 4 types of charity legal form are:

You can find more detail on the most common legal forms for Scottish charities:

•        Our Legal Forms Factsheet 
•        SCVO setting up a charity

What you plan to do will help you choose the right legal form:

•        Will you own or rent property?
•        Will you employ staff?
•        Will you enter into contracts?

If the answer to any of these questions is ‘yes’ you should consider an incorporated legal form. Being incorporated means the law considers your organisation to be a person in the same way as an individual. This is called having a legal personality.

Having a legal personality means your organisation can to do many things in its own name, like:

•        employing staff
•        entering into contracts and service agreements
•        owning land or other property
•        taking legal action.

It also means that generally the charity trustees aren’t personally liable for what it does.

If your organisation is unincorporated, that means it has no legal personality of its own and:

• the charity trustees are personally liable for what it does
• it won’t be able to enter into contracts or control some investments in its own name
• one or more trustees will have to ‘hold’ any land or property on its behalf.

Around 70% of new applications to become a charity are for an incorporated legal form, mainly SCIOs.

Key OSCR guidance

There is more information about what it means to be 'incorporated' in A Guide to Incorporation. 

A governing document is the written statement that sets out a charity's purpose, structure and describes how it will operate. It will usually deal with other matters, including who will manage and control the organisation, what its powers are, what it can do with money and other assets, and membership.

Once you have decided which legal form is best for your plans, you’ll need the right governing document:

We recommend you use a model governing document (if appropriate) like the ones on the SCVO website, or from an umbrella body, like Early Years Scotland or the Development Trusts Association Scotland. This will help make sure that your governing document contains all the sections needed to meet legal requirements and support the charity trustees in running the charity.

Asset lock: An organisation will fail the charity test if its governing document allows it to use any of its assets for a purpose that is not a charitable purpose under the 2005 Act. This applies during the lifetime of the charity and when it is being wound up.

SCIOs: If you choose a SCIO as your legal form you will also need to decide which constitution is the most appropriate for your circumstances and there are two options:

1. A single tier structure: governed by charity trustees with no additional members.

2. A two-tier structure: governed by charity trustees with a membership body which has certain powers or duties.

SCVO have more information on what it means to be a membership body. 

Key OSCR guidance:

• SCIO guidance
• Charity Trustee Guidance and Good Practice: Governing Documents

A charity’s purposes are set out in the governing document. They say what the aims of the charity are and what it has been set up to achieve. They might be called objects, aims or purposes.

We recommend you get advice on writing your charitable purposes.

Each purpose you have must fit within at least one of the charitable purposes set out in the 2005 Act.  

You could use the following wording to structure your purposes:

Key OSCR guidance:

• Meeting the Charity Test: Guidance

You need to think carefully about your name, including any acronyms. A charity cannot have a name that is the same or too similar to an existing one, or is misleading or offensive. Check the Scottish Charity Register to make sure your name is not the same or too similar. If we think there is a problem with the name we will contact you to tell you why.

If the name contains certain ‘sensitive words or expressions’ Companies House must check and approve before they can be used in a company or SCIO name. For example:

• Scotland or Scottish
• Trust
• Foundation
• Association
• Society
• Fund

You will need to send confirmation about the name from Companies House with your application to become a charity. 

Key OSCR guidance:

•       FAQs: SCIO’s on the Index of Company Names
•       Charity Names guidance