Setting Up A Social Enterprise

Related imageYou must choose a business structure if you’re starting a business that helps people or communities (a ‘social enterprise’).

If you want to set up a business that has social, charitable or community-based objectives, you can set up as a:

  • limited company
  • charity, or from 2013, a charitable incorporated organisation (CIO)
  • co-operative
  • community interest company (CIC)
  • sole trader or business partnership

If you’re setting up a small organisation like a sports club or a voluntary group and do not plan to make a profit, you can form an ‘unincorporated association’ instead of starting a business

Social enterprises are distinct from traditional charities or voluntary organisations in that they generate the majority, if not all, of their income through the trading of goods or services rather than through donations.

Charity Types

You need to choose the right structure for your charity, depending on whether you need it to have a corporate structure and whether you want to have a wider membership

There are four main types of charity structure:

  • charitable incorporated organisation (CIO)
  • charitable company (limited by guarantee)
  • unincorporated association
  • trust

Your charity structure is defined by its ‘governing document’ (the legal document that creates the charity and says how it should be run

More detailed information can be found here

Charity Registration

When to apply to register your charity

Usually, you must register with the Charity Commission if your charity is based in England or Wales and has over £5,000 income per year.  The commission will take action to secure compliance if it identifies a charity which isn’t registered but should be.

If your charity is a charitable incorporated organisation (CIO) it must register whatever its income.

Charities that don’t have to register

Small unincorporated charities

If your charity is based in England and Wales and isn’t a CIO, you don’t have to apply to register it if its annual income is less than £5,000.  But you can still apply to HM Revenue and Customs for recognition as a charity to get charity tax breaks and claim gift aid.

You can apply to the commission to register this sort of charity voluntarily, but the commission will only consider applications in exceptional circumstances.  For example, if you can prove that your charity has been offered significant funds but has to provide a registered charity number before it can receive the funds.

More details can be found here

Changing Your Charity’s Structure

When to change charity structure

Changing to a different charitable structure usually involves setting up a new charity, transferring your original charity’s assets and liabilities to it then closing your original charity.

Your charity’s legal structure sets out what type your charity is. There are four common types of charity structure:

  • charitable incorporated organisation (CIO) – there are 2 structures; association CIO and foundation CIO
  • charitable company (limited by guarantee)
  • unincorporated association
  • trust

Your charity’s legal structure determines:

  • who will run it and whether it will have a wider membership
  • whether it can enter into contracts or employ staff in its own name
  • whether its trustees are personally liable for what it does

A “Changing Charity Structure Checklist” can be found here

Charitable Incorporated Organisations – CIOs

http://www.taylorbracewell.co.uk/cms/img_articles/charities1.jpegThe Charitable Incorporated Organisation – CIO –  is a relatively new form of incorporated legal structure that is designed to meet the particular needs of a charity and is only available to charities.  A CIO is a corporate body which is not a company incorporated under the Companies Acts; it is therefore not subject to company regulation. Neither its existence nor any charges it creates have to be registered at Companies House.

The corporate structure provided by the CIO meets a demand from the charitable sector for a structure which gives a charity a legal personality of its own, enabling it to conduct business in its own name, rather than in the names of its trustees.

More information can be found on the Government website: https://www.gov.uk/guidance/charity-types-how-to-choose-a-structure