Limited: Not For Profit

By Mahmood Reza

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

CLICK HERE for more details from the HMRC site

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:

Numbers KnowHow

Additional Information

CLICK HERE for additional Legal 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