When you are starting a music group thinking about the formal structure is not necessarily top of the list. But as groups grow and become more stable it is a good idea to start thinking about how your group is structured.
We have some guidance that explains what we mean by a formal structure, why it’s a good idea, and some of the options available.The most common of these structures for our members is an 'unincorporated association': not-for-profit organisations that can be either charitable or non-charitable. The guidance below explains more about unincorporated associations and includes links to template documents to help you set one up.
What is an unincorporated association?
It is an organisation that is formed when a group of people come together for reasons other than to make a profit e.g. community music group, amateur theatre company, or village sports team.
- They have members who have a say in how the organisation is run.
- They are not-for-profit organisations - this means any profit that is generated goes back into achieving the organisation’s aims and no profit is distributed to its members, including when the organisation disbands.
- It is not as formal a structure as a company and does not always have to register and report to a regulator (some charitable unincorporated associations do - see below).
Advantages of an unincorporated association
- They are very easy to set up - it just requires that the people who will be in charge agree to set one up and create a constitution or governing document that outlines what the organisation is for (aims) and rules for how it will operate.
- They are easy to manage - it is an informal and flexible structure designed to be simple for volunteers to run.
- The reporting requirements are not too onerous. Non-charitable unincorporated associations do not have to register with Companies House and charitable ones with an income under £5k do not have to register with the Charity Commission. However, unincorporated associations should still produce accounts and are of course subject to financial and legal regulations and laws.
Something to be aware of:
An unincorporated association is not a legal entity in its own right and so cannot enter into contracts. This means that if you do enter into a contract it is the people running the organisation that enter into it on behalf of the organisation. That means the liability lies with those individuals and they are responsible for any debts and contractual obligations. In practice this is not as frightening as it might sound. You can get indemnity insurance cover to protect against this and with sensible management any risks can be minimised.
It does mean that an unincorporated association is generally better suited to small and medium sized organisations. Large organisations with a high turnover that enter into high value contracts and employs people (as opposed to engaging with freelancers), may want to consider setting up an incorporated organisation (see below). If you start small and grow you can change your unincorporated association into an incorporated organisation.
Incorporation: an incorporated organisation does have its own legal personality and so the liability is limited to the organisation and not the people running it. Although in some circumstances (e.g. wrongful trading) a director of an incorporated organisation could be held personally liable and be disqualified from being a company director or charity trustee. There are a few different incorporated structures (both charitable and non-charitable) suitable for a music group.
Charitable unincorporated associations
Unincorporated associations are not-for-profit organisations but they do not necessarily have to be charitable.
To be a charity you need to have specifically and exclusively charitable purposes. Your charitable purposes must conform to those defined by the Charity Commission (regulator in England and Wales), OSCR (regulator in Scotland) and the Charity Commission Northern Ireland, and be able to demonstrate that your organisation offers a clear public benefit. We have a model constitution that has been approved by the regulators for our members to use if they would like to become charitable.
Some other characteristics of charitable unincorporated associations:
- They have a wider membership that has a say in the running of the organisation – e.g. they can vote at the AGM.
- The people who run the organisation (charity trustees) are elected by the members for the members.
- When they disband, remaining assets have to be given to a charitable organisation with similar aims.
- If the organisation’s income is over £5k/year it must register with the Charity Commission and submit information to them on an annual basis.
- If income is under £5k/year it cannot register but is still subject to charity governance and regulation by the Charity Commission.
Why be a charity?
We have more information available but some of the key benefits are:
- Financial incentives: charities can claim Gift Aid on donations and (potentially) membership subscriptions. There are also other tax benefits.
- Funding: many funders will only fund charities – so charitable status can open up more funding opportunities.
- Credibility: being a charity (particularly a registered one) can add authority and credibility to your organisation with potential members and supporters.
Some things for charity trustees to be aware of:
As well as the general issue of liability for unincorporated associations (see above) charity trustees should be aware of charity regulations and the legislation they must comply with. These include:
- You have to be aware of your charitable purposes and be sure that your activities are aimed at fulfilling them.
- There are rules about how you can raise money for charities that do not have similar charitable aims.
- Registered charities have to submit information to their regulator on an annual basis. For smaller charities this reporting requirement is not too onerous.
- There are rules about how you can trade and limits on how much income you can generate before you pay tax.
You can find out more about all of the above in our Trustee Handbook.
Non-charitable unincorporated associations
The above points are not points against being a charity. They are sensible and important regulations in place that help trustees understand their responsibilities and ensure the charity sector is well regulated and accountable - which helps the public’s faith and confidence in the sector.
However, the regulations do inherently remove some flexibility in how you operate and what you can do. For many groups this is fine - they are happy to operate within these regulations, and indeed find the regulatory framework useful in running their group. When you add in the benefits offered there are often clear advantages to being a charity.
However, some groups find it useful to have more flexibility rather than the benefits offered by charitable status. They do still of course have to act and operate within the law, but they have more freedom in what their aims can be, their structure, and how they operate to achieve their aims.
Aims and how they operate:
- It is likely that, for the most part, the activities of a charitable and non-charitable music group, such as a community choir, will be similar. But non-charitable ones can have less specific wording in their aims with less emphasis on public benefit, which gives them more options in the activities they undertake.
- They are not bound as much by their aims. A charity with musical aims that decided it wanted to explore providing drama or painting opportunities alongside their music would find it harder to do. It is not impossible but there is more regulation and bureaucracy involved compared to a non-charitable organisation who simply have to decide among themselves.
- A non-charitable unincorporated association can also include an aim specifically to raise money for other local organisations. Charities are restricted in how they can raise money for organisations which do not have similar (i.e. musical) objects. Again, it is not impossible but there are less options and more red tape to navigate.
- A paid Music Director (MD) - many groups have a paid MD who is also on the committee. Whether you are charitable or not this presents a conflict of interest between the MD and the group. In both circumstances this can be absolutely fine, as long as the conflict is managed properly. As with the above points managing the conflict is generally involves more paperwork for a charitable group. Charity trustees have to consider the issue of personal and public benefit and might need permission from the Charity Commission to pay the MD, at the very least they will have to declare the conflict of interest. A non-charitable organisation can manage this conflict internally and not having to consider public benefit means more flexibility in how the paid MD works with the committee and group.
This issue is something to consider for all groups with a paid MD on the committee, but it can be particularly relevant for a group that is going from being a one man band run by an MD to setting up a more formal structure with a committee. In this type of situation the transition can be difficult - the MDs goes from making all the decisions to giving up at least some control to the committee, which can cause tensions. The non-charitable route at this stage means the new committee members do not have to consider public benefit or think about getting permission from the Charity Commission. The conflict of interest should still be acknowledged but the increased flexibility of the non-charitable route can make for a more harmonious transition from a one-man band to a committee structure.
Structure – and the role of members
Charitable unincorporated associations have a wider membership that usually pay to be members of the charity and have a say in how the charity is run. Most often this means members can:
- stand for election as a committee member
- elect committee members
- approve changes to the constitution
- hold the committee to account at the Annual General Meeting
- request a Special General Meeting.
Non-charitable unincorporated associations can have the same structure. This approach works very well for lots of music groups - especially performing ones. Members of a music group having a say and being emotionally invested can really help shape the organisation and contribute to its success.
Non-charitable unincorporated associations do have another option. They can be setup so that the committee are the formal members and the ones who make all of the decisions, and new committee members are appointed by existing committee members (as opposed to a member vote).
Groups set up like this can still have an informal membership. This might be a friends scheme for a festival or music club, but could also be for performing members too (e.g. choir). This gives some structure to the group and helps the committee manage numbers and plan activities. It may mean informal members will feel connected to, and invested in, the group. They can still be consulted too, but do not have any formal influence and so cannot:
- stand for election (although they could put themselves forward to the committee as a potential committee member)
- influence who runs the organisation via elections
- approve changes to the rules and principles of the organisation in the constitution
- hold the committee to account at General Meetings
This works well for promoting groups (such as music societies and festivals) who present music rather than perform it themselves and so don’t have a wider performing membership. That said it can work equally well for performing groups, especially youth groups where you might not want the members to have a vote or for an adult group where a small team is happy to do the work and the singers or players just want to turn up every week, pay their fee, and don’t feel the need to have any further involvement than this.
- Model constitution for a charitable unincorporated association
- Model constitution for a non-charitable unincorporated association – with a wider membership
- Model constitution for a non-charitable unincorporated association – without a wider membership
Key things to remember and consider about unincorporated associations
We hope you find this Making Music resource useful. If you have any comments or suggestions about the guidance please contact us. Whilst every effort is made to ensure that the content of this guidance is accurate and up to date, Making Music do not warrant, nor accept any liability or responsibility for the completeness or accuracy of the content, or for any loss which may arise from reliance on the information contained in it.