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
• Are you getting involved in trading activities which could create
personal financial risks for your members – eg if the business
failed, or if there were unforeseen and uninsured losses?
• Will it genuinely improve your image with funders and
supporters? – groups should be careful about coming
under pressure from officers in public bodies who do not
really understand the third sector; there may be no harm in
registering when you are told to, but get independent advice
from a support agency if you are concerned.
What is the best time to register the company?
• Not too soon: Some organisations choose to register as limited
companies from the very start.
− if you register before you have done the business planning
you risk choosing an inappropriate company structure
− technical discussions about the memorandum and articles and
responsibilities of directors can sometimes be a distraction for
a new group, and they may also put off potential members.
• When activities demand it: It may be better to leave
incorporation to the time when you can see the practical needs
for company status, for example:
− to set up the board of directors who will take responsibility
for implementing a newly completed business plan
− when you have to take action on property or employment
issues
− if your existing unincorporated association structure starts to
get complicated.
• Before registering as a charity: If you intend to set up a charitable
company you need to plan the company incorporation and the
charity registration together. The new Charitable Incorporated
Organisation (CIO) structure, (which is expected to be introduced
in 2011 after some delay) will make this easier than the two-stage
process in the past. (See sections 4.3 and 4.4 on types of structure
and charity trading below.) If you register an unincorporated
association as a charity first and decide afterwards to turn it into
a limited company you will have to re-register the charity. This is
more complicated, and involves:
− reapplying to the Charity Commission for charitable status for
the new company or CIO
− transferring the assets from the old to the new organisation
(you probably need professional advice on this)
− formally winding up the unincorporated association.
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