Organisation Start-up Advice & Support

Unincorporated associations are run by individuals who are bound together by common rules (or a group constitution). 

This structure suits small organisations. It's the most common type of structure for small community groups.

These groups usually:

• Do not employ staff.
• Do not own significant assets (e.g. land, investments or facilities).
• Do not enter into significant contracts.

• Simple Administration - This is the easiest, cheapest and most informal way of forming a group.
• Unincorporated associations (unless they're also a charity) do not need to file accounts or an annual return, like companies do. 
• Flexibility - The rules can be whatever you choose, provided they are lawful, and can be easily updated.
• However you may need to include clauses to satisfy your governing body or funders. 

• There is no seperate legal identiy - The organisation is not separated from its members, in the eyes of the law. This means committee members have to enter into contracts, or hold assets, on behalf of the club. 
• If there's a claim against the organisation, or breach of contract, members of the committee, or wider organisation could be personally liable.  

Adopting charitable status may benefit your organisation. However you'll need to abide by certain rules and reporting requirements. 

An organisation must be able to demonstrate that its aims are charitable, and carried out for the benefit of the public. This means the organisation will need to include in its constitution the charitable and public benefit purpose.

If the organisation has charitable purposes but intends to trade, for instance to sell tickets, merchandise, food or drink for a profit, you may have to consider setting up a trading subsidiary.

• Tax relief on charitable expenditure including trading profits, rental income.
• You'll get tax benefits if you sell an asset or buy property.
• Clubs get 80% relief from business rates. 
• Charities often enjoy considerable support from funders and the public. 
• You can claim Gift Aid  on donations.
• Charities can run certain fundraising activities that may be banned or require a licence for non-charities. 

• Status - once registered, a club cannot stop being a charity. 
• Administration - regulation by the Scottish Office of the Charity Regulator can be an administrative burden. 

These organisations are regulated by the Scottish Office of the Charity Regulator for charity trading and income from gifts and grants.

Scottish Charitable Incorporated Organisations (SCIO) offer the benefits of being incorporated and charitable status.

The objective must be exclusively charitable and meet the public benefit test. The charity can trade, although trading for a profit would require a trading arm. 
 

• It works well if all of the organisations income is to come from donations and grants.
• It provides a separate legal entity for the organisation and offers members limited liability  
• Potentially reduced administration in comparison to a charitable company.  

• It restricts fundraising if the organisation wants to develop property or land that could be borrowed against. 
• As a relatively new structure, it is less well known and understood by third parties including banks and local authorities, but this is gradually changing.  

 An organisation that's set up as a company, and limited by guarantee, will be owned by its members. This is similar to an unincorporated organisation.

However the main difference is that the organisation will have a separate legal identity, allowing it to enter into contracts in its own right.

This structure is well suited to organisations operating on a non-profit making basis. 

Members agree to pay a minimal amount  if the organisation becomes insolvent, limiting their liability.

Members are entitled to attend members meetings and vote. This includes the right to appoint and remove directors.

The Organisation will be governed by its articles of association. Depending on how the articles are written, they may qualify for grant funding.

• Being a separate legal entity - this allows the organisation to enter into contracts and hold assets or investments in its own name. 
• Limited liability - members are protected and only required to pay an agreed sum (typically £1) if the club becomes insolvent.
• The directors of the company, and the members, are protected against claims, provided that the directors have complied with company law requirements. 

• The administration needed to comply with legal requirements - including filing annual accounts, annual returns and providing directors’ information to Companies House.
• There are fines for missing deadlines.
• The articles need careful drafting to protect the club and its assets.

A community interest company (CIC) is a company that operates for the benefit of the community.

To qualify, the company must be limited by guarantee or shares - and demonstrate their community benefit.

A community interest company cannot obtain charitable status and there are no tax benefits.

• Company members have limited liability.
• There's a clear, limited company structure, for organisations wanting to be seen as social enterprises rather than a charity.
• The rules, including the assets lock and community benefit test, provide clarity and focus on what it means to be of benefit to the community. 

• CICs must meet certain requirements which set out how assets can be used (e.g. asset lock). 
• There's no tax relief. 
• There are administration requirements.

A Co-operative exists for the benefit of their members.

It is a business with limited liability. 

It is regulated by the Financial Conduct Authority and governed by the Cooperative and Community Benefit Societies Act 2014.  

A Co-operative cannot obtain charitable status and there are no tax benefits.

• Providing a separate legal identity for the organisation. 
• Protection to members.
• Companies are recognised and understood by external parties (e.g. banks, local authorities). 
• Cooperatives are regulated by the Financial Conduct Authority (FCA). 

• Other structures may be more straightforward to set up and administer.

A  Community Benefit Society exists for the benefit of  the wider community.

It is a businesses with limited liability. 

It is regulated by the Financial Conduct Authority and governed by the Cooperative and Community Benefit Societies Act 2014.  

A Community Benefit Society can obtain charitable status and tax benefits but only if set up for the benefit of the community and it meets the criteria for being a charity). 

• Providing a separate legal identity for the organisation. 
• Protection to members.
• Companies are recognised and understood by external parties (e.g. banks, local authorities). 
• Cooperatives are regulated by the Financial Conduct Authority (FCA). 

• Other structures may be more straightforward to set up and administer.

 A Social Enterprise is not a type of legal structure. A social enterprise exists to make a profit just like any private sector business, but their profits (or surpluses) are always reinvested into their social and environmental purposes. A social enterprise can be a registered charity as well, if it can meet the charity test. It could be any of the structures outlined above, there is no separate structure specifically for a Social Enterprise. 

 The Community Amateur Sports Club (CASC) scheme provides a number of charity-type tax reliefs to support local sports clubs. 

The scheme can offer important financial benefits to clubs including significantly reducing business rates and allowing clubs to generate additional income through Gift Aid.

• Mandatory 80% relief from business rates. 
• The ability to generate income through the Gift Aid scheme. 
• Exemptions from corporation tax. 
• It sets limits on the costs for members. 

• You'll need to make sure your club fits the requirements outlined by HMRC. 
• You'll need to meet certain conditions, such as being open to the whole community. 
• There are requirements regarding participation and income generation. 
• You'll need to ensure your club is structured appropriately and has the necessary governance arrangements.