If you are establishing a theatre company, you almost always have to go this route: incorporate yourselves as a non-profit organisation with a board of directors.
Registered Charity, Non-Profit Organisation and Not-for-Profit Organisation are all the same thing, it is just that fashions change as to what to call them. Back when I worked in England with Footsbarn, we were a "Registered Charity."
In order to receive money as a grant from the Arts Council, the Ministry of Culture, and from most other organisations (which tend to be non-profit themselves), your organisation has to be non-profit. However you don't have to be non-profit in order to provide a paid-for service, receive a fee, pass the hat in the street, or sell tickets as an organisation. In other words, if you are a purely commercial "for profit" enterprise then you can't ask for grants but you can accumulate and keep wealth.
"Non-profit" is exactly what it implies. You can be paid reasonable wages and pay reasonable expenses and buy necessary equipment and materials, but any money left over is not yours. It is restricted like that because you are being given a substantial amount of money on trust, and being given other advantages too, on the understanding that you are serving the public interest and not your own.
With a "for profit" company only the tax authorities are interested in your finances and can ask to see your accounts. With a "not for profit" organisation, everybody who gives you grants will be interested in seeing your accounts, including your budget.
If eventually the organisation closes down then what is left over in money and equipment has to be either returned to the government (Charity Commissioners for example) or passed on to another non-profit organisation. There are a lot of theatre companies with hand-me-down stage lighting and trucks!
The people who give grants want to know that you do what you say you will do, and in a responsible way. So they keep a close eye on you. And one of the ways they do that is by having you set up a board of directors (Danish: bestyrelse) who are not supposed to get any money or personal advantage from what the organisation does, but at the same time are held responsible.
In other words, they do it for free, out of the goodness of their hearts, and they are the ones, bless them, who could go to jail if you don't follow the rules.
Depending on the individual country, there are different rules and implications when a paid working member of the organisation wants to be on the board. In Denmark, for instance, it can viewed as giving you too much control over your own employment, as if you were self-employed, and therefore ineligible for unemployment insurance (A-kasse).
Now here's the most important thing about boards of directors for not-for-profit arts organisations:
IT IS NAÏVE TO THINK THAT IT IS JUST A FORMALITY.
How often I have seen young groups casually collect together a board of directors in order to meet the requirements, with the implicit understanding that "If you do this for us we wont hassle you. There'll just be the occasional meeting where you rubber stamp what we've been doing and get to bask in our artistic glory and participate in our noble cause. Now do you take sugar in your tea?"
The problem is that when the shit hits the fan, as eventually it inevitably does, a group of unlikely people are suddenly in charge of your dream.
Here is a typical scenario:
The group is of course reluctant to hassle the board and so leaves it too late to ask for help. And that is assuming that the board would have been competent to help in the first place. Then the board panics when they suddenly realize that they are guilty of not really following matters, that they don't really understand the issues, and that they are legally responsible. Typically they over-react by firing people and/or closing the organisation down. And yes, it seems cynical, even absurd, but these people do have the power to to do that, and when push comes to shove they will exercise that power, if only out of guilt for not paying proper attention and fear of the personal consequences. I have seen that one play out several times.
So choosing your board members is as important as choosing your performers. The actual number of members is a trade-off between having a spread of expertise, and having the possibility of holding meetings with full attendance. There has to be a certain minimum number at a meeting in order to make a decision, what is known as a "quorum."
Always be sure that you understand each person's reasons for wanting to be on the board. They must understand that it is going to take their time. They will be expected to follow closely, stay up to date, and give advice when wanted and without undue interference. They tend to be busy people, so it is a lot to ask.
Here are some archetypes:
The Accountant. Someone who understands and is interested in budgets and accounts. Usually in it for the novelty, adventure and social aspects. This guy is essential. Usually appointed Treasurer.
The Community Contact. Often a social worker, priest or teacher who understands local structures and resources. Usually an effective promoter of the group's interests. Often appointed Secretary.
The Politician. Usually a necessary evil who is there to lend an air of respectability. Is out of his/her depth when it comes to artistic matters. Hopefully realises that. Usually is appointed Chairperson because of status and leadership experience. Perhaps an elected representative, or a powerful civil servant. Useful for dropping in a good word or giving the nod in the right places. Penchant for decisive action can make this person dangerous in a crisis.
The Business Person. Experienced at promoting a product, and with management skills. Someone in PR or Media is very handy.
The Fellow Artist. Can be okay because of ability to understand the weird mixture of altruism and ambition that exists in such a group, as long as this person doesn't interfere or try to exploit the group. Best when following a different artistic discipline (musician or painter) than the group itself.
The Mentor. With their career well established and having had many experiences, and with a mature understanding of the art form and the perspective of another generation, this person can extract generalities and help the group to navigate the chasm between ideals and reality.
The Arts Administrator. Obviously very useful, but check that there is no conflict of interest.
The Technician. A nuts-and-bolts practical person who can give advice on things like buying or renting materials, equipment and vehicles. Not necessarily a theatre technician. Usually has strong opinions but keeps them to him/herself unless asked.
The Art Lover. The consumer who would have liked to have been a producer. A romantic. The first to feel guilty and confused in a crisis.
The Sublimator. A version of the Art Lover with even more deeply seated frustrations. Can be unpredictable in a crisis. To be avoided.
The Family Member. Parent, lover, older sibling. Brings loyalty and often relevant skills, but is not an honest broker in a crisis. Perhaps participating as a favour, to fill up seats, or shore up a group member's position.