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
A formal public status: The company is publically accountable
– it has to put details of its directors and accounts on file at
Companies House. But in practice there are relatively few legal
restrictions on what it can do or how it should behave, other
than those it chooses to impose on itself in its memorandum and
articles of association, or those imposed by charity law if it is a
charitable company.
Existing legal responsibilities: Concerns about your legal
responsibilities are an extremely poor reason for opting not to
form a limited company. Members of groups who agonise over
the legal implications of becoming company directors are usually
missing the point. They already have legal responsibilities to the
public and the people they do business with, right from the time
they form a steering group to plan their enterprise. Company
status simply gives them a few extra (and not very onerous)
responsibilities in return for the privilege of limited liability
protection. To make things even easier, the law on Director’s
duties has now been codified in the Companies Act 2006.
When to incorporate
Is it a good idea? The decision to form a limited company and
timing the registration is entirely a matter of choice. However,
serious trading projects are very likely indeed to reach the point
when registration becomes strongly advisable because of the scale
of their financial or legal responsibilities. The following checklist is
a rough guide to judging when to act:
• Are there substantial assets to protect - eg a building?
• Do you have significant employment responsibilities?
• Are you taking legal responsibilities which make it more
appropriate or necessary to have a collective identity?
– for example
− a building lease – in unincorporated organisations it is
common for two of the members to be required to take
personable responsibility by signing lease agreements and
other contracts as individuals, and this may well be seen as an
unfair or unreasonable burden
− activities which create significant obligations or risks to the
public (such as consumer protection and health and safety
issues) – any significant level of service provision or trading is
likely to qualify
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