LEGAL STATUS

For a start, when you are setting up and choosing the most appropriate form of company structure you need to consider the liability implications. Put simply, if your organisation is unincorporated and the business fails then those on the committee are fully responsible for the debts of the business. One of the main purposes of becoming incorporated is precisely to offer protection for committee/board members from the affects of business failure.

Further information on this: VAN briefing note on 'Incorporation' 

To help you make your decision on the most appropriate type of structure for your organisation you should consider:

• Risk to the Trustees and to the organisation;
• Reporting & accountability: formal structures require a high level of accountability compared to informal associations; and the
• Cost of setting up the organisation, such as annual accounts etc.

Some popular legal options include:

• Unincorporated Association
• Company Limited by Guarantee
• Community Interest Company (CIC); and
• Charity.

NCVO: Reducing the Risks: A Guide to Trustee Liabilities.

Tourism North East provides information on company structures, visit their website for further information.  

NCVO highlights some issues to consider when choosing an organisational structure: http://www.ncvo-vol.org.uk/sfp/?id=2225#Legal_form

Charities Information Bureau South & West (CIB) website offers the following guides www.cibsouthandwest.org.uk:

Rough Guide to becoming a company limited by guarantee Click here to download
Rough Guide to forming a charity Click here to download
Simplified version of a Constitution Click here to download
Tax Relief on Interest and Charities Click here to download
What is a governing document? Click here to download
Why register as a charity? Click here to download

Definitions

Unincorporated Association
is the simplest form of legal identity that you can adopt, as it is an informal structure and can be cheap to set up and run. But the members will be personally liable if the organisation is sued or incurs liability. An unincorporated association is a group of people agreeing to abide by certain rules to further the interests and activities of the group. It is not a legal entity in its own right, but a collection of individuals. As such it cannot own property, take out loans or raise funds as an organisation.

Company Limited by Guarantee
This is a popular and reasonably straight forward legal structure which many festival and event organisers adopt, some also acquiring charitable status as well. Unlike a commercial company, a not-for-profit company does not distribute profits to members as all the money and property belonging to the company must be used for charitable purposes or putting it back to your activities. All members must agree to pay a nominal sum, usually £1, if the company becomes insolvent.

For company formation and registration information visit Companies House website www.companieshouse.gov.uk.

Community Interest Company (CIC)
CIC status is designed for people who wish to run a company for the benefit of the community, rather than solely to make money. The main feature of CICs is that they are 'asset locked' to prevent the assets (cash, goods, property, etc) and profits of the company being used for anything other than community benefit.

Community Interest Company: VAN briefing note 106 on this form of legal enterprise, www.voluntaryarts.org/uploaded/map4910.pdf

Case-study of Bristol based CIC Watershed by NCVO.

Social Enterprise
Social enterprise is an increasingly popular model for business operation. They are defined by the UK Government as 'businesses with primarily social objectives whose surpluses are principally reinvested for that purpose in the business or in the community'. Social enterprise isn't a legal structure as such, so you still need to register as a Company Ltd by Guarantee or CIC for example.

A business planning guide to developing a social enterprise - produced by Fourth Sector in Scotland, is useful guidance for any voluntary or community organisation who may be thinking of social enterprise as a way to develop their activities: www.forthsector.org.uk/docs/New_BusPlanGuide.pdf

Charitable Status
A group is charitable if all of its aims and objects as stated in its constitution are charitable. There are four categories of charitable objects recognised by the Charity Commission:

o       The relief of poverty;

o       The advancement of religion;

o       The advancement of education; or

o       Other purposes beneficial to the community.

To register as a charity with the Charity Commission, you must have a constitution and your objectives must be charitable.

VAN briefing note 22, Getting charitable status www.voluntaryarts.org/uploaded/map197.pdf

The Charity Commission for England and Wales
http://www.charity-commission.gov.uk/