A guide to third sector trading - WCVA

More documents

Recommendations

Info

It’s an idea, but is it business? A guide to third sector trading 1: Getting started 2: First steps 3: Business planning 4: Legal and governance 5: Funding and resourcing 6: Financial controls 7: Managing growth 8: Management and governance 9: Social enterprise 10: Sources of support • The parent charity’s name can be included in the name of the trading subsidiary, so long as this does not give the false impression. It is acceptable to use a form of name like: “[charity name] Sales Company Ltd” for the subsidiary. • Company law restricts the use of the words “charity” and “charitable” in the name of any company, and they should only be used in the title of the subsidiary if they form part of the parent charity’s name. Pros and cons of trading subsidiaries The advantages of trading subsidiaries: • charity law: A charity is not allowed to carry out any substantial trading activity – whether or not it is primary purpose trading or ancillary trading as described in section 4.3 – because this could put the assets of the charity at risk. (For instance, the business might fail leaving debts which the charity would have to meet.) Trading by a subsidiary company instead removes this danger. • protecting the organisation’s assets: Non charities are not compelled to take the same course to protect their core activities and their buildings and other assets from the possible failure of trading activities, though they often choose to use trading subsidiaries too. • tax benefits: The most compelling reason for establishing the structure of a parent charity with one or more trading subsidiaries is that if business profits are transferred by Gift Aid to the charity they escape Corporation Tax. For many aspiring enterprises the choice to set up a tax saving subsidiary is a no brainer. • clarity: for charities the split between social (charitable) and commercial activities can provide clarity for staff and volunteers, and be useful for promotion and marketing purposes. • management: It can be extremely useful to be able to create a harder-nosed business culture in the trading operation which is distinct from the parent charity’s more socially-orientated role in looking after the interests of volunteers, trainees and disadvantaged groups of users and clients. Disadvantages of the trading subsidiary approach: • cost and complexity: In some cases parent companies set up every trading activity as a separate subsidiary company. This can become messy and expensive for small organisations to administer if there are more than two or three trading ventures. For instance, accounts must be prepared and filed at Companies House separately for each company. 102
It’s an idea, but is it business? A guide to third sector trading 1: Getting started 2: First steps 3: Business planning 4: Legal and governance 5: Funding and resourcing 6: Financial controls 7: Managing growth 8: Management and governance 9: Social enterprise 10: Sources of support • profits: The tax incentive can prove to be an illusion – it may be several years before subsidiaries are making significant taxable profits. • const r aint s: The trading subsidiaries of charities have less freedom than is sometimes thought. Charity trustees cannot take jobs with the trading companies as this is seen as a financial benefit from the charity. The charity must report on the activities and finances of its subsidiaries to the Charity Commission as if they were its own. • control: Charity trustees remain responsible for the activities and assets of their trading subsidiaries. They cannot simply leave the business board to its own devices in order to reduce their own workload. Partnerships and jointly owned subsidiaries: Subsidiary companies can have more than one owner. An interesting example of a jointly own social enterprise company is Tidy Trev which was established by Ebbw Vale Development Trust and Tredegar Development Trust to carry out recycling and environmental work collaboratively. • Advantages: Formalised partnerships have the advantage of: − encouraging co-operation in areas and activities where there could be damaging competition for contracts − combining the resources and expertise of two or more bodies to produce service delivery organisations with greater collective capacity and clout than single enterprises can achieve. • Disadvantages: − Joint projects can be time-consuming to set up, and require detailed procedural arrangements, including agreement between the partners on how profits are to be shared − Collaboration between two separate businesses with their own working practices can pose significant practical problems. − Tensions can easily result if either partner is unable or unwilling to completely fulfil its part of the joint service arrangement. • Further guidance: Joint companies can involve complex arrangements beyond the scope of this guide. It is suggested that the Development Trusts Association or legal advisors specialising in company formations (not necessarily an inexpensive option) are consulted for further information. 103
Page 1 and 2:
It’s an idea, but is it business?
Page 3 and 4:
Page 5 and 6:
Page 7 and 8:
Page 9 and 10:
Page 11 and 12:
Page 13 and 14:
Page 15 and 16:
Page 17 and 18:
Page 19 and 20:
Page 21 and 22:
Page 23 and 24:
Page 25 and 26:
Page 27 and 28:
Page 29 and 30:
Page 31 and 32:
Page 33 and 34:
Page 35 and 36:
Page 37 and 38:
Page 39 and 40:
Page 41 and 42:
Page 43 and 44:
Page 45 and 46:
Page 47 and 48:
Page 49 and 50:
Page 51 and 52:
Page 53 and 54: It’s an idea, but is it business?
Page 103: It’s an idea, but is it business?
Page 155 and 156:
Page 157 and 158:
Page 159 and 160:
Page 161 and 162:
Page 163 and 164:
Page 165 and 166:
Page 167 and 168:
Page 169 and 170:
Page 171 and 172:
Page 173 and 174:
Page 175 and 176:
Page 177 and 178:
Page 179 and 180:
Page 181 and 182:
Page 183 and 184:
Page 185 and 186:
Page 187 and 188:
Page 189 and 190:
Page 191 and 192:
Page 193 and 194:
Page 195 and 196:
Page 197 and 198:
Page 199 and 200:
Page 201 and 202:
Page 203 and 204:
Page 205 and 206:
Page 207 and 208:
Page 209 and 210:
Page 211 and 212:
Page 213 and 214:
Page 215 and 216:
Page 217 and 218:
Page 219 and 220:
Page 221 and 222:
Page 223 and 224:
Page 225 and 226:
Page 227 and 228:
Page 229 and 230:
Page 231 and 232:
Page 233 and 234:
Page 235 and 236:
Page 237 and 238:
Page 239 and 240:
Page 241 and 242:
Page 243 and 244:
Page 245 and 246:
Page 247 and 248:
Page 249 and 250:
Page 251 and 252:
Page 253 and 254:
Page 255 and 256:
Page 257 and 258:
Page 259 and 260:
Page 261:
show all

A guide to third sector trading - WCVA

Create successful ePaper yourself

Delete template?

Save as template?