When you are starting a music group thinking about the formal structure is not necessarily top of the list. With finding venues, members and music you have plenty on your plate without creating more paperwork and admin - and to be honest an informal, flexible approach can be useful when you are getting things off the ground. But as groups grow and become more stable it is a good idea to start thinking about a formal structure for your group.
Contents:
- What do we mean by 'a formal structure'?
- Why formalise?
- What types of structure are available?
- The most common structures for our members
- Key questions to answer to help decide which structure is right for your group
What do we mean by 'a formal structure'?
There are various different structures a music group could take and we have listed some of the most common ones below, along with the key considerations for each. The formal structure will impact how your group operates and what you can and can’t do. Each structure has different considerations and you may find that one of the structures already fits in with what you are doing and how you operate. But you should be aware that it may mean making some changes.
Once you have decided which option is best suited to your group, the next step is to establish a governing document that sets out your reasons for existing (purpose/aims) and rules about how you operate as an organisation. This might include; rules about membership, rules about who runs the organisation, rules about how funds can be used and processes for how decisions are made.
The type of governing document you adopt will depend on which structure you opt for and the terms in the governing document should reflect that structure. For example a charitable governing document needs to have specific clauses that establish you as a charity, and a company limited by guarantee needs a memorandum and articles of association that have specific terms to establish the company as being limited by guarantee.
Depending on the type of structure you may also need to register with a regulating body. We will explain more about these later, but first…
Why formalise?
It gives you authority and credibility: whether its group members, audience members or funders, running a music group generally involves taking money, spending money, making decisions and providing services. It is not unreasonable for the people trusting you to do these things on their behalf to want to know that you are acting in a sensible and legitimate way. Having a formal structure in place tells people you are serious about what you do and gives them confidence in you – meaning they are more likely to get involved and help.
It will help you run your group: formalising involves establishing a governing document that sets out the principles of how your group will be run. Some parts are a legal requirement outlining what you can and can’t do while other parts will have elements of choice. A good governing document will provide some basic rules of how your group will operate; a framework for how decisions will be made and clarity over how your group will work in practice.
Resolving disputes and problems: disputes and conflicts do occur from time to time. A governing document provides clarity over how to deal with them. Experience has taught us this is the single biggest help in resolving any issues. It not only provides practical procedures, but helps remove personal conflict by having a document to rely on. We hope you never need a constitution for this purpose, but if you do you will be very glad it’s there.
Sharing workload and being sustainable: people are hugely important to a music group – the time, effort and care they put in are vital. This can be especially true at the beginning of a group’s life – often they get off the ground due to the will and enthusiasm of one or two people. This is OK and sometimes the best way to operate at the beginning – but it does create a single point of failure and sooner or later those people will want to be less involved. Putting a formal structure in place can help with this transition, and beyond, as it:
- provides a foundation and identity for the group helping it to exist and survive in its own right
- stops the reliance on the knowledge and efforts of one or two people
- provides a clear way for new people to get involved and share the workload
- provides a framework for new people to operate in when they do get involved
It can help protect you: often people involved in running groups not only do a lot of work but also take on a lot of risk. Having a legal structure in place can help mitigate and manage this risk.
Full membership: to be a Full member with Making Music you must have a constitution that meets our Full membership criteria. If you don’t have a constitution you can still join as an Associate member – but the insurance premiums are more expensive and you can’t vote in our AGM.
What types of structure are available?
We have listed the most common types of structures for music groups below with some brief details on each. Some of the things to consider when deciding on a structure are:
The question of profit – Making Music is primarily for leisure time community music groups and so most of our members operate on a not-for-profit (NFP) basis – which means they do not exist and trade to make a profit. Any income they generate goes back into the organisation and is not distributed as profit to members. NFP is the most common approach for community music groups and the options below are NFP models. Profit making structures are of course available such as a company limited by shares or someone running a group as a sole trader. Such groups can join Making Music as Associate members but may not be eligible for certain benefits.
Charitable status: NFP does not necessarily mean charitable, you can be an NFP organisation without being a charity. To be a charity you must have specific and exclusive charitable aims. There are definite benefits to being a charity but also some things to be aware of. Having charitable aims can place restrictions on what you do. For example if your charitable aims are for putting on musicals, you cannot decide to start doing drama productions instead or to donate money to charities with different (e.g. animal welfare) charitable aims. That is not to say those things are impossible – just that there is less freedom and more bureaucracy than with some non-charitable structures. Find out more about charitable status.
Liability: some of the structures below are unincorporated organisations and some are incorporated. In basic terms this means:
- Unincorporated – the liability lies with the people running the organisation and so they are responsible for any debts and contractual obligations.
- Incorporated – the liability lies with the organisation so the people running it have no personal liability. That does not mean they can act negligently or dishonestly. In some circumstances (e.g. wrongful trading) a director could still be held personally liable and be disqualified from being a company director or charity or trustee.
Unincorporated bodies generally have less regulatory requirements (although are still of course subject to law).
In practice the question of liability is something a typical community music group should be aware of, but not necessarily worry about too much. The risks to those running it are quite small and can be managed. Ultimately you are the ones making the decisions and you will know the expected income and expenditure for your activities - so you can manage the risk accordingly. Having an insurance package that includes indemnity insurance would help mitigate risks.
Often it comes down to size. If a music organisation has a large turnover, has employees (as opposed to engaging freelancers) and enters into high value contracts then it might be worth considering incorporating. Find out more about incorporated and unincorporated organisations.
Registration and reporting requirements – the different options below all involve different levels of regulation. Companies limited by guarantee, for example, have to register with Companies House and some charities have to register with the Charity Commission whilst unincorporated associations don’t always have to register. With registration comes reporting requirements, again these vary but for small organisations they are generally not too onerous.
Membership: if you have a wider membership (e.g. members of the choir) some structures will be more suitable than if you don’t have a wider membership (e.g. a promoting group/festival).
If you do have a wider membership another question to consider is how much say do you want the members to have? Some options mean the wider membership (the choir) has a say in how the group is run (e.g. stand for election to the committee, vote at the Annual General Meeting and call a Special General Meeting), whereas other structures don’t give the wider membership these powers and all decisions are taken by the committee.
The most common structures for our members
This section is split into charity structures and non-charitable.
Charity structures
1. Unincorporated Association
This is the most common structure for our member groups. They are easy to setup and have the lowest level of reporting requirements for a charity. Suitable for small to medium sized performing groups.
- Liability: unincorporated, so liability is with the committee/trustees.
- Registration: if income is over £5k/year you must register with the Charity Commission.
- Reporting: if registered you have to submit information to the Charity Commission annually. If your income is under £25K/ year they are quite low requirements.
- Wider membership: you must have a wider membership that has a say in how the organisation is run (vote at AGM etc.).
- Governing document: charitable constitution
Find out more about unincorporated associations and view our model constitution for a charity.
2. Charitable Incorporated Organisation
This structure was introduced in 2013 in England and Wales and 2011 in Scotland. It has less reporting requirements than a Charitable Company. As liability is limited it is suitable for larger organisations with high liabilities and risk.
- Liability: incorporated, so liability is limited to the organisation (assuming directors are acting in good faith).
- Registration: must register with the Charity Commission, regardless of income.
- Reporting: must submit information to the Charity Commission annually. Reporting requirements higher than for unincorporated associations.
- Wider membership: there are two options;
- Association model – does have a wider membership with a say in how the organisation is run
- Foundation model – does not have a wider membership with a say in how the organisation is run – all decisions are made by the committee
- Note: the foundation model can still have members (e.g. of a choir) – but they don’t have any formal power or influence).
- Governing document: charitable constitution
3. Charitable Company
This is less common among our members and community music groups in general. Has the highest level of reporting requirements for a charity.
- Liability: incorporated, so liability is limited to the organisation (assuming directors are acting in good faith)
- Registration: if income is over £5k/year must register with the Charity Commission. Must also register with Companies House - regardless of income.
- Reporting: if registered you have to submit information to the Charity Commission annually and to Companies House. Reporting requirements higher than for unincorporated associations.
- Wider membership: can have a wider membership with a say in running the organisation but does not have to.
- Governing document: memorandum of association and articles of association
4. Charitable Trust
Less common among community music groups - this structure is used for charities that give grants.
- Liability: unincorporated so liability is with the committee/trustees.
- Registration: if income is over £5k/year must register with the Charity Commission.
- Reporting: if registered must submit information to the Charity Commission annually. If your income is under £25K/ year they are quite low requirements.
- Wider membership: does not have a wider membership – all decisions are made by the committee.
- Governing document: trust deed
Charity Commission guidance on charity structures: |
Non-charitable options - the most common options among our members are:
1. Unincorporated Association (not charitable)
This is the most common non-charitable structure for our member groups. They are easy to setup and have low reporting requirements. Suitable for small to medium sized performing and promoting groups.
- Liability: unincorporated so liability is with the individuals running the group.
- Registration: does not have to register with the Charity Commission or Companies House.
- Reporting: does not need to report to a regulator on an annual basis.
- if they trade and make a profit they have to pay Corporation Tax and file a Company Tax Return with HMRC.
- Wider membership: can have a wider membership with a say in the running the organisation but could also be set up so the committee makes all decisions and members have no formal say.
- Governing document: constitution (non-charitable)
Find out more about unincorporated associations and access template governing documents.
2. Community Interest Company (CIC)
This structure is for companies that don’t have specifically charitable aims but do have a social and community focus. They are generally NFP but can be set up so some profit is shared out (please note: a CIC with this set up would not qualify for Full membership with Making Music, but could be an Associate member).
- Liability: incorporated so liability is limited to the organisation (assuming directors are acting in good faith)
- Registration: must register with Companies House and be approved by the CIC regulator.
- Reporting: have to submit information to Companies House on an annual basis.
- Wider membership: can have a wider membership with a say in running the organisation but does not have to.
- Governing document: memorandum and articles of association
3. Company Limited by Guarantee
Less common among our members and community music groups in general. They don’t have charitable objects and so offer more flexibility in what they can do than charities. While the reporting requirements are not too onerous for most community music groups, this structure and regulatory framework is often more than is needed and an unincorporated association is often better suited to their activities.
- Liability: incorporated so liability is limited to the organisation
- Registration: must register with Companies House
- Reporting: have to submit information to Companies House on an annual basis.
- Wider membership: can have a wider membership with a say in running the organisation but does not have to.
- Governing document: memorandum and articles of association
Find out more about setting up a company limited by guarantee
Key questions to answer to help decide which structure is right for your group
|
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.
