A Not For Profit Organisation

If you are considering setting up a social enterprise, or not for profit organisations, then options to consider could include;

  • companies limited by guarantee, 
  • Community Interest Companies (CICs) or
  • Charitable incorporated organisation (CIO).

Profits (or assets) from these companies are not available for the “members” of these organsisations. 


companies limited by guarantee

A limited company protects its members from financial and legal risk (unless personal guarantees are provided).  
  • Accounts still have to be submitted to the authorities, such as Companies House 
  • corporation tax may still be due on any profits made.
With a company limited by guarantee, members’ liability is typically limited to £1.  



Community interest companies (CICs)

A CIC is a special type of limited company which exists to benefit the community rather than private shareholders.

This is becoming an increasingly popular company model encouraging social entrepreneurship and private investment; which benefits the individual investor and the wider community.  


Set up

To set up a CIC an application needs to be made to Companies House, and must include a community interest statement, explaining what your business plans to do.  


A CIC can include private shareholders but an asset lock must be created:

  • A legal promise stating that the company’s assets will only be used for its social objectives, and
  • Setting limits to the money it can pay to shareholders.  

The company must be approved by the community interest company regulator. It cannot be a registered charity



Charitable incorporated organisation (CIO)

This is a new legal form for a charity and is an incorporated form of charity which is not a company.

  • Register with the Charity Commission and not Companies House
  • It is only created once it is registered by the Commission
  • It can enter into contracts in its own right and its trustees will normally have limited or no liability for the debts of the CIO


A CIO provides some of the benefits of being a company, but without some of its burdens.


Need expert advice?

For expert advice on how to set up a CIO, please visit us at:

www.proactiveresolutions.com

Additional Information 


Advantages of a CIO

  • It is a separate legal entity existing in its own right, distinct from the people who run it.  
  • Funding bodies and public agencies see it as a more stable structure than a voluntary association.  

Disdvantages of a CIO

  • It can be costly to set up and run.
  • There is a regulatory and administrative burdens

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