Charities are subject to a body of law known as charity law. Therefore it is always advisable for anyone interesting in starting a charitable organisation to take legal advice from specialised charity law solicitors as to what their obligations are.
To begin with there are a number of legal requirements about setting up an organisation with charitable status. The legislation concerning registration of charities can be subject to change and therefore it is important to keep abreast with changes in legislation through organisations such as the Charities Advisory Trust.
A second key area in which charities must ensure compliance with the law is through their fundraising. Businesses are profit driven and therefore unless they are shareholder based they have a degree of flexibility with how they spend their money.
Charities on the other hand either exist on grants made by donor organisations or through money raised through fundraising. They therefore have to be accountable for how they spend their money. Not only is there a legal obligation to be accountable there is also a strong moral argument that if you have raised money to help provide medical treatment to ill children in Africa you should spend the money doing so. The morality of their behaviour however is not sufficient to monitor charities and therefore the law has had to ensure that legislation exists to make charities comply with their obligations towards money raised through fundraising initiatives.
Obviously charities also require money to be spent on general business costs such as salaries, office rental and communications. The law attempts to find a way of ensuring that charities do not spend an excessive amount of their money on running costs and none on actually carrying out the work they have allegedly fundraised for.
