Like so many things that a person sets out to build, the underlying structure and intent combine to create the final form. Some structures will help one aspect of the organization and hinder others. No structure is perfect and everything comes with an amount of give and take.
Forming a community interest company provides flexibility not seen in other structures. As a legal form, it enjoys some leeway not given to for-profit businesses. At the same time, it benefits from many of the features that empower charities.
For those planning to grow into the future, consideration needs to be paid as to both the long term goals and the initial start-up and longevity. What community to assist and what products or services to offer all contribute to this decision.
Read on to learn more about the benefits and what separates a CIC from a charitable organization.
Form a Community Interest Company
There’s certainly not a cut and dry reason to form a CIC over a charity. Both structures allow an organization to give time, effort, and money to others.
Both also allow those gifts to be towards a local area, a specific group, or to benefit people.
Charities are specifically non-profit and function almost exclusively on donations. They can apply to grants and for funds earmarked specifically for charitable organizations.
Community Interest Companies don’t have to start or stay strictly non-profit. This makes them lucrative ventures for investors and provides incentives to innovate to increase dividends.
They also qualify for some grant opportunities in addition to being able to generate capital by offering a product or service.
Product or Service?
While the end-goal of a CIC is to help out a community (whatever shape that community takes) it does so through the sale of a product or service.
The product or service can be something that helps a community itself, such as selling safety equipment or cleaning up a contaminated area.
The profits from the sales are applied to the organization as a whole and disturbed as seen fit as long as the CIC contributes to a social objective.
Benefits Vs Charities
Charities have tax breaks that are not afforded to CICs. However, CICIs benefit from expanded liability coverage over charities.
CIC company formation is more straightforward and takes less time than a charity. The funds that roll into a CIC are locked, which ensures a level of public trust but also can stay solvent over longer periods fo time, allowing them to put forth long term endeavours.
Unlike a charity, that requires consistent audits, a CIC enjoys leeway in the distribution of funds.
Board and Staff
The flexibility of a CIC means it needs fewer directors (1 instead of 3) and can offer salaries to directors.
The flattened structure lets the director work with employees without losing crucial control over projects and operations as happens with charities.
It’s easier for employees to perform at a higher level than volunteers because they don’t have to operate in multiple jobs/roles.
There are numerous benefits of creating a community interest company but it isn’t always the best choice. When looking to use start-up capital and to push an innovative idea while helping the public, it’s an excellent choice.
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How we can help
To get started on establishing a CIC or for other financial guidance contact KG Accountants for more.