The Difference Between PBOs vs. Trusts in Kenya
Thinking of making a positive impact in Kenya? Choosing the right legal structure for your initiative can be tricky. Two popular options are Public Benefit Organizations (PBOs) and Trusts. Both can achieve social good, but they function quite differently. Here’s a breakdown to help you pick the perfect fit:
PBOs: Champions of Public Benefit
Imagine a well-organized club with a clear mission. That’s the essence of a PBO. Here’s what sets them apart:
1. Structured and Public: PBOs typically (though not always) have a defined membership and governing body, ensuring transparency and accountability.
2. Public Benefit Focus: Their primary goal is advocating for a cause or delivering public services like education or healthcare.
3. Earning for Good: PBOs can raise funds through events or small businesses, as long as the profits fuel their public benefit goals.
4. Tax Breaks and Support: The government might offer PBOs tax breaks and even funding to support their good work.
5. Registration Required: PBOs need to officially register with the government to operate legally.
Trusts: Flexibility and Privacy
Trusts offer a more relaxed approach:
1. Simpler Structure: Forget memberships! Trusts rely on one or more trustees who manage the funds according to a set of rules outlined in a Trust Deed.
2. Wider Goals: Trusts can be set up for various purposes, not just public benefit. They can even manage family wealth or hold assets for future generations.
3. Limited Money-Making: While Trusts can’t directly run businesses, any income from their investments can be used to achieve their goals.
4. Tax Implications Vary: The tax treatment of a Trust depends on its specific purpose.
5. No Registration Needed: Trusts don’t require government registration.
Choosing Your Champion:
· Pick a PBO if: You have a clear public benefit mission, seek tax breaks and government support, and prefer a structured organization.
· Pick a Trust if: You need more flexibility in your goals (beyond public benefit), don’t require tax breaks, and value a simpler, less regulated setup. Or you need to manage family wealth.
Diving Deeper: The Legal Landscape
Now, let’s explore the legal nitty-gritty:
PBOs:
1. Legal Framework: Governed by the Public Benefit Organisations Act, 2013, specifically designed to support their establishment and operation.
2. Registration: Requires registration with the Public Benefit Organizations Regulatory Authority.
3. Focus: PBOs are all about public benefit activities, addressing social issues, and advocating for positive change.
Trusts:
1. Legal Framework: Governed by the Trustee Act, and the Trustees (Perpetual Succession) Act, a broader legal framework for managing assets.
2. Incorporation: (Where needed) incorporated with the Registrar of Companies
3. Flexibility: Trusts can be established for various purposes, including charitable work, family wealth management, or holding assets for specific beneficiaries.
Key Differences in a Nutshell:
1. Legal Framework: PBOs – Public Benefit Organisations Act, Trusts – Trustee Act, Trustees (Perpetual Succession) Act.
2. Registration/Incorporation: PBOs – Public Benefit Organizations Regulatory Authority, Trusts – Registrar of Companies.
3. Focus: PBOs – Public Benefit Activities, Trusts – Broader range of purposes (including public benefit).
The Bottom Line:
PBOs are specifically designed for public benefit activities and operate under a dedicated legal framework. Trusts offer more flexibility in purpose and are governed by a broader legal structure. Choosing between them depends on your specific goals, desired level of government oversight, and need for tax breaks.
Note: with both PBOs and Trusts, you can make a real difference in Kenya!
Remember: The above is not specific legal advice for you. Always consult a lawyer to determine the best option for your specific situation.
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