Setting Up a Charity – Part I: Get The Legal Structure Right

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Starting a new charity is an exciting time to make a positive difference, but the legal side of things can be confusing.

Whether you’ve just got an idea, or already working in your community – if you’re looking for guidance on how to get your legals right, you’ve come to the right place!

To guide you on the things you need to know, we’ve put together a two-part blog series on how to set up a charity.

This Part I will cover the different legal structures that are available for your charity. Specifically, we’ll cover what it means to “incorporate” a charity, and whether you should incorporate as an Incorporated Society or a Charitable Trust.

If you already know what structure you want, you can skip this article and go straight to Part II: Get Registered.

What does it mean to incorporate a charity?

Incorporating means that your charity becomes its own legal entity that exists separately to the members.

The benefits of incorporation include having its own legal identity, ability to sign agreements, limiting liabilities for the members, and so on. If you’re thinking seriously about the charity and its long term, you should definitely think about incorporating.

There is still the option of registering an “unincorporated” charity – however, there are some downsides. You’ll be exposed to risks because an unincorporated structure will always be tied to the members individually as it does not have a separate legal identity. This means you may be personally liable for any debts incurred or obligations owed if things go south.

If you decide to go down the unincorporated route, you’ll need to get your rules drafted, set your charitable purpose, and register with Charities Services – please contact us if you need any help with this.

If you want to know more about how to incorporate a charity, keep reading!

Incorporated Society v Charitable Trust

If you decide to incorporate your charity, you have two options:

Incorporated Society under the Incorporated Societies Act 1908
Charitable Trust under the Charitable Trusts Act 1957

Below is a table outlining the differences in incorporating your charity as an Incorporated Society or a Charitable Trust:

Item	Incorporated Society	Charitable Trust
Incorporation fee	Fees will vary depending on whether the society name has or has not been reserved. View the fees here.	Incorporation fees apply; view them here.
Annual reporting	To both Societies Office and Charities Services.	Only to Charities Services.
Geographic operation	Permitted to operate New Zealand-wide.	Permitted to operate New Zealand-wide.
Members	Need minimum 15 members.	Only need two trustees.
Management	Incorporated Societies must have a “committee” with 3 or more “members” who are +18 and ordinarily reside in New Zealand. Specific requirements and roles will depend on the society’s rules, but generally the committee may also have non-members on the committee.	A Charitable Trust must have a “board of trustees” with at least 2 trustees.The trust’s deed may set out further requirements and roles.
Address	Must be in New Zealand.	The trust can be anywhere in New Zealand.

In summary, the key deciders for the legal structure that is right for you are:

The required level of organisational formality
Set up costs
Number of members
Board structure
Availability of a public address
Geographic locations of operation
Tax implications

Conclusion

There are many elements that need to be considered when you are deciding on a legal structure for your charity. It is essential for you to understand all the relevant laws governing the legal structures for you to make informed decisions.

Still confused about what legal structure is right for your charity? Feel free to contact us for help.

Once you have your legal structure sorted, it’s time to move to Part II: Get Registered.

Alice Kang

Alice is a legal intern at Sprintlaw. She is currently completing her Bachelor of Laws from Macquarie University and looking to do further study in the area of finance and law.