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
• they lend themselves well to democratic arrangements at board
level and open membership for communities and charities
• they can also be designed to be highly secure, undemocratic
organisations which offer protection to trading assets
• they are cheap to set up and cheap to run
• they are legally and publicly accountable, which tends to
encourage good practice in their activities.
Disadvantages:
• companies limited by guarantee are not ideal structures
for managing streamlined trading activities – for example,
arrangements for company memberships and board
appointments can be cumbersome
• their flexibility can lead to confusion or disagreements about
how they ought to be structured and run.
• the possible additional costs of having annual accounts
prepared by a qualified individual
• special arrangements (such as those provided by community
interest companies) are needed to enable assets to be ‘locked
in’ for community benefit and for commercial partnership
arrangements with other organisations
• they do not on their own offer special tax advantages which
social enterprise organisations would like (unlike charitable
incorporated organisations and companies limited by guarantee
with charitable status)
• requirements for annual returns and filing annual accounts
mean there is a small amount of extra bureaucracy, this is
backed up by an aggressive system of automatic fines for late
filing of required reports
• the requirement that the names of trustees, and the accounts,
are available for public inspection.
• the sense of unease which some committee members in small
organisations misguidedly feel about being called ‘directors’ or
about their ‘legal responsibilities’.
CICs – advantages and disadvantages
Community Interest Companies are described in detail in section
4.5. But it is useful to set their advantages and disadvantages
alongside conventional companies limited by guarantee which
they are most likely to be compared with.
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