An Introduction to Legal Structures for 'Not-for-Profit' Organisations

  • Price: £3.60
  • Published: August 2015
  • Type: Business Information Factsheet
  • Format: PDF

The term 'not-for-profit organisation' (NFPO) is widely used to refer to a variety of types of organisation that have a community focus, however 'not-for-profit' has no legal meaning and it is not a formal legal structure.

Organisations that have a community focus include different types of voluntary organisations and community groups. Social enterprises, which are commercial ventures with social aims are also NFPOs, although the term social enterprise has no legal meaning and it is also not a formal legal structure. Other types of organisation with a community focus include charities and co-operatives.

The term not-for-profit is also misleading because all organisations must make a surplus or at least cover their costs in order to survive. However, with some exceptions, NFPOs typically re-invest all their profits in their organisation to fund their continuing activities rather than distributing them to the owners or shareholders, hence are considered to be 'not-for-profit'.

NFPOs of whatever type need a formal legal structure in order to operate and there are various types of structure available. Some structures are particularly suitable for, or are typically used by, certain types of organisation as they provide the best fit with their aims and objectives.

This factsheet briefly explains the available legal structures for NFPOs and provides examples of the types of NFPO that commonly use each structure. It also explains some of the management and financial requirements to be complied with, briefly explains the meaning of charitable status and CASC status and provides sources of further information and support.

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