A guide to third sector trading - WCVA

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 registration process is fairly easy, and need not deter anyone.
• The registration process is fast – usually within two weeks unless
your forms are returned by Companies House because they
have not been completed properly.
What is incorporation?
Limited companies are legal entities: Registering your group
as a limited company changes the legal status of the people who
are running it.
• Unincorporated associations (groups which have not yet
registered to become limited companies) are regarded in a
legal sense as a number of separate individuals who are each
personally responsible for the activities of the organisation.
• Incorporated organisations – ie limited companies of any type
and Industrial and Provident Societies – are seen by the law
as single entities, which are separate from the people who are
running them. In the unlikely event of legal action being taken
against a charitable or community-owned company, it is the
company which will usually find itself in court, rather than the
directors or staff in their personal capacity.
Limited liability protection: By far the most common type of
company in the third sector is a ‘company limited by guarantee’.
Unlike other types of company, there is no shareholding. So the
members do not stand to lose their investment – just a limited sum
of money (usually £1 or £10) which they have guaranteed to pay if
the company is unable to pay its debts. In short, members are not
personally liable for their company’s debts.
The formal structure: Incorporation as a limited company requires an
organisation to take on a particular formal structure – but this is actually
not very different from the structure used by most unincorporated
voluntary groups. It will include rules about issues such as:
• general membership of the company: (these are the people
and organisations who have the power to elect or appoint the
directors – although the ‘board’ and the wider ‘membership’
are sometimes identical in practice)
• who can be a company member
• the size and make up of the board
• how board and company meetings are conducted
• what to do with the assets if the company is wound up
• how to handle other issues such as reporting, conflicts of
interest, and the way directors are appointed or elected.
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