A guide to third sector trading - WCVA

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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 benefits: There are only minor benefits for small community and charitable organisations becoming established as Community Interest Companies limited by guarantee. Larger trading ventures may find them more useful. • CIC’s have most of the flexibility of ordinary companies limited by guarantee or limited by shares. • They are designed for and are well suited to expanding third sector trading organisations which have significant assets to protect. • The ‘asset lock’ arrangements means that CIC’s can be useful for establishing partnerships with conventional businesses – for instance, in order to attract private investment to support a large-scale community development such as a wind farm without risking the community assets being taken over at a future date by the partner companies. • The ‘community interest’ tag may underline the message for the public that the organisation exists for community benefit. This possible public relations benefit is the only real advantage for most small CICs. • So few CIC’s are being established that they are distinctive – and this could be useful for marketing and public relations purposes. • CICs can be owned by charities as trading subsidiaries (though it is not clear that this is really a benefit over other types of subsidiary company, because charities already have a built in ‘asset lock’ arrangement). Disadvantages: • CICs cause confusion as additional options for the constitutional structure of social enterprises. The confusion is exacerbated because the alleged benefits have often been exaggerated, and so do not make sense to newcomers when weighing up which constitutional route to take. • There is a small amount of extra expense (£35 annual return fee, compared with £15 for an ordinary company). • There is a small amount of extra bureaucracy. An annual Community Interest Report must be written and submitted to the CIC Regulator at Companies House to show how the company has in fact acted in the interest of the community. • CICs do not enjoy any of the tax benefits of charities which also provide the ‘asset lock’ benefit. 84
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 Contacts Sources of information: See the organisations listed in 10.1 and 10.2 85
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A guide to third sector trading - WCVA

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