The key feature of a charity is that it is established exclusively for charitable objects as defined in the Charities Act 2006 which can be seen on the Charity Commission website

Many social enterprises are trading charities – this is particularly useful if organisations have a mixed revenue model that relies on an element of fundraising. However it is important to note that charities , can only trade in pursuit of their charitable object (termed ‘primary purpose trading’); so if your business is set up to advance education you can only sell services connected to education. You couldn’t sell chocolate or graphic design services for example, because that in itself wouldn’t forward the cause of education. To overcome this some charities set up a separate ‘trading arm’ – a company of some kind that sits underneath the charity.

Charitable Incorporated Organisations (CIO)

The CIO, is a new legal form for a charity that wants to be incorporated but does not wish to become a company. CIO’s only have to register with the Charity Commission and not Companies House. This legal form was created in response to requests from charities for a new structure which could provide some of the benefits of being a company, but without some of the burdens.

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