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Legal Entity

Robert Castelo's picture
Wed, 29/02/2012 - 10:20 — Robert Castelo

The association needs to be a legal entity, we need to decide on what kind of legal entity.

This relates to the goal Comply With Legal Requirements.

Some criteria are:

  • Cost of settup
  • Effort needed to maintain
  • Tax liability
  • Capable of signing contracts
  • Limited liability

Please discuss the options below and add other options that are relevant.

 

Timescale: Consultation ›
Sun, 02/09/2012 - 19:48 — Robert Castelo
Robert Castelo's picture

Company Limited By Guarantee (CLG)

Positives & Negatives

Positive

  • Less regulated than charity
  • Limited liability
  • Controlled by the members who elect the Management Committee
  • Members cannot benefit from any profits made
  • If wound down can transfer assets to any type of organisation

Negative

  • No tax advantage, taxed same as a normal company

Requirements

Costs

  • A registration fee
  • Legal fees to a lawyer for assistance in establishing the company
  • A recurring fee for submitting annual returns
  • Recurring administrative costs, including auditing fees, through having to comply with the Companies Act

Consideration

  • Can be formed by a group of people (Steering Group) who wish to set up a new organisation
  • A not for profit company limited by guarantee can be exempted from having the word 'Limited' (or 'Ltd') at the end of its name if it is set up for certain objects. These are the promotion of commerce, art, science, education, religion, charity or any profession.
  • Can be converted to a charity
  • 'Society'
    To use this word the company should normally be limited by guarantee with each member having one vote and include a non-profit distribution clause in the articles of association which provides that any profits should be used to further the objects of the company and not be paid to the members as dividends. The articles should also include a one member one vote clause.

Reference Material

Sun, 02/09/2012 - 19:33 — Robert Castelo
Robert Castelo's picture

Community Interest Companies (CICS)

Positives & Negatives

Positive

  • Less regulated than charity
  • Limited liability
  • Profit lock
  • Regulations to make it transparent

Negative

  • No tax advantage, taxed same as a normal company
  • Name must end with a prescribed designation
    “community interest company” or “cic” or “community interest public limited company” or “community interest plc”

Requirements

  • Filing of annual returns and accounts with a CIC annual report

Consideration

  • No dividends to be payed so a CIC limited by guarantee is a good option

Reference Material

http://www.bis.gov.uk/cicregulator/guidance/chapter-2

Sun, 02/09/2012 - 19:46 — Robert Castelo
Robert Castelo's picture

Charity

Positives & Negatives

Positive

  • Tax reduction

Negative

  • Can take 40 days+ to register with Charity Commission
  • Much more work to comply with regulations

Requirements

  • Constitution
  • Bank account
  • Business plan
  • Registration with Charity Commission
  • Trustees

Consideration

  • Most societies that advance science, medicine, the arts, etc. are charities
  • If the charity is going to  fundraise, enter into contracts, etc, it would need to be set up as a corporate body that can do all this in its own right, which also provides limited liability to members and trustees
  • If wound up, needs to give it's surplus to another charity (is DA a charity?)
  • No need to register with Charity Commission until organisation has income of £5,000 or more

Reference Material

http://www.guardian.co.uk/society/2009/oct/12...
http://www.charitycommission.gov.uk
http://www.charitycommission.gov.uk/Start_up_...