You always hear how charities are raising money for this benefit or that one, but what is a charity? How does it work?
A charity is a foundation that promotes public good. It is not for any one individual’s assistance, but for many people in need. By setting up this institution to help those in need, the creators maintain a sense of accomplishment and joy in knowing they did something amazing.
A charity can be created in more than one way. It can either be a company limited by a guarantee, a trust or an unincorporated association. A governing document is needed for each charity that states its objects and how its going to be administrated. A charity that is registered needs to be administered by a board of directors, and a board of trustees administers a trust.
The definition of charitable, by law, must come in account when choosing a charity. It must have a purpose that the state or nation will approve. The advancement of education, help in financial hardship and other beneficial purposes that help the community are different examples of what they accept. Though a charity helps those in need they still need to follow the law and as such, must follow company law as well. Once a charity registered they need to follow some rules. These include, but are not limited to, regulations covering finances, accounts, management and trustees.
A charity, being a non-profit organization, may only use the money it receives to further and advance the organizations purposes. They are not part of any local authority or governing department, which makes them independent.
Like anything, there are advantages and disadvantages of having and running a charity. VAT, inheritance tax and income tax are just some of the benefits. The disadvantages being you are not allowed to take sides in anything political.