Community Interest Companies were introduced in 2005 to address the need for non-charitable community enterprise in the UK. At the moment there are over 3,000.00 Community Interest Companies across the country. CIC vary greatly from the range of their activities to how successful they are. As in the case of commercial businesses you will find small enterprise with few members and multimillion community company projects involved in various sectors, most commonly education, health, media and general social work.

Legally, CICs are very similar to standard limited companies but they do have some unique features. At the moment, there are two types of CICs: companies limited by guarantee and companies limited by shares.

What are the main differences between standard LTDs and CICs?

Firstly, when establishing a CIC you will need to make sure that the future company satisfies the so-called community interest test. The test is in place to ensure that Community Interest Companies are not misused but serve a genuine community purpose. This varies greatly dependent on particular circumstance but may include things such as promotion of well-being or development of climate change awareness programme in certain area.

Unlike standard limited companies, CICs have their assets locked against free distribution to members. To distribute the assets to the members certain pre-defined conditions must be met. This mechanism ensures that communities are not cheated upon and that all assets and funds available to the CIC are used for the specific community purpose that a particular CIC is serving. Even upon dissolution all proceeds from the sale of CICs’ assets would go to benefit the community.

How to register a Community Interest Company?

The registration process is very straightforward and to some extent similar to standard ltd registration process. You will need to make an application to the Companies House, pay the relevant fee, state the CIC’s social agenda and activities and deliver the articles of association along with personal details of the directors to the Companies House. At the end of each year, CICs must file ther accounts along with a community interest report. The report must clearly set out what the CIC has done for the community to fulfil its community interest agenda. Also when making an application you will need to specify whether you would prefer the CIC to be a company limited by guarantee or a company limited by shares.

To find out more about CICs and the registration process you can also visit the Business Link service.

What is the difference between Company Limited by Guarantee and Company Limited by Shares?

Company Limited by Guarantee

In the case of a company limited by guarantee the members personally guarantee a certain sum that they will put into the company should it be dissolved. The downfall of this method is that the CIC would not be able to raise any equity finance by issuing more shares. The CLGs cannot pay dividends to their members

Company Limited by Shares

Here as in the case of standard limited company, the members’ maximum liability is limited to the sum paid for their shares. If the shares have not been fully paid for a member would be required to pay the outstanding amount into the company. This type of CIC is able to pay dividends to its members. The dividends are however regulated to ensure that assets are sufficiently locked and protected.

Who is the relevant regulator?

CICs are regulated by Community Interest Companies Regulator. This is supposed to provide a lighter regime than that for charities regulated by the Charity Commission.

If you have been mulling over the idea of starting up your own business then probably one of the questions which has been running through your mind is ‘Do I need a licence?’

In most cases (although see below) the answer is you don’t need a specific licence to start up a business so, if you have a plethora of exciting and original ideas for a new business circling round your brain, then why not pick the one that appeals the most and start doing a bit of research to see what kind of work and outlay would be involved.

We will discuss some of the factors you will need to take into consideration when planning to start your own business later on in this article but first let’s take a look at the types of businesses which will require a licence.

• If you intend to start up a business which involves lending money to the public then you will require a Consumer Credit Licence. A Consumer Credit Licence can be obtained from the Office of Fair Trading

• If you run a business which provides some type of organised activity or entertainment such as concerts, theatrical performances or sports events you will need to obtain a licence from your local council or the council of the town or city in which the event is due to take place

• If a part of your business will involve the sale of alcohol such as a café then you will also need to apply to your local council for a licence

• You will require a Waste Carrier’s Licence, obtainable from the Environmental Agency, if your business involves the transportation of waste products

• A licence from the local council will need to be acquired if you intend to start up your own taxi business

• A licence obtained from the Security Industry Authority will be required if you are planning to operate your own security business

• If you intend to start up your own street trading business but will not be a part of an organised street market then you will require a Street Trader’s Licence which, again, are supplied by your local council

• In some cases you may find that you will need a licence from your local council if you wish to run and let out a property to several sharing individuals such as a student house or digs

• If your business will involve operating buses, other service vehicles or goods vehicles weighing over 3,500kg you will need to apply for a licence from the Vehicle and Operator Services Agency or VOSA

Points to Remember when starting up a New Business

Target Market –

Before jumping in at the deep end it is imperative that you thoroughly research the demand for the product or services you are intending to offer and find out where your target market lies. For example, if you are starting up a baby clothes business the large majority of your target market will be mums. Try to tailor your business to appeal to this particular market.

Suppliers –

Although you don’t want to stint on quality you also don’t want to be out of pocket before you have even started. Choose a supplier who offers quality products which are reasonably priced and start off small with your first few orders until you are up and running. It’s also a good idea to look out for any special offers, discounts or end of range products that the supplier is offering.

Premises –

When choosing your business premises it is a good idea to start with a selection and slowly whittle them down according to your budget and requirements. Check out whether there are any hidden or extra charges and how much you will need to put back for business rates. You will also need to find out whether they type of business you are intending to run is authorised on the premises you have opted for otherwise you will need to obtain planning permission before you can start trading.

Advertising –

Advertising is the key to whether your business succeeds or fails so always ensure you device a good advertising strategy and remember to direct your advertising at your main target market.

• Limited Liability Companies;
• Limited Liability Partnerships;

How to register a company?

Limited Liability Company

To register a limited liability company, you will need to apply to the Companies House to be included in the Registrar of Companies. Although, it is relatively easy to incorporate a company yourself you should seek professional advice (i.e. from an accountant, solicitor or formation agent). Once you have decided that you would like to register a company, you will need to send the following legal documents to the Companies House:

• Application to Register a Company (Form IN01) – you must include details of the company’s registered office address, names and addresses of any directors, particulars about shareholdings and information about initial capital.
• Cheque with registration fee (currently £20
• Constitution of the company including:
  • memorandum of association should provide full names of each subscriber and proof of their consent to become members;
  • articles of association – if you decide not to adopt model articles of association you should clearly include details of how the company is going to operate, what are the shareholders’ rights, powers of directors and any relevant restrictions on their authority.

Partnership

Unlike companies, partnerships are registered with the HMRC. To register the partnership, the nominated partner needs to inform HMRC and all other partners must also declare their interests in the partnership. Dependent on how complicated the partnership is you may need to use one of the following:

• Form SA104 – if the partnership is only receiving trading and taxed income, such as interest from banks or building societies you can use this simplified form;
• From SA104F – if the partnership has other forms of income in addition to the above-mentioned.

Sole Trader

If you have a business idea and want to ‘test the waters’ before registering a limited company, sole-trading offers a convenient alternative with less onerous filing requirements but also a few disadvantages.

To register as a sole trader, the only thing you need to do is register for self-employment with the HMRC. Please however do bear in mind that unlike a limited liability company, sole trader’s liability is unlimited and should you find yourself in business debts you may have to use your personal assets to pay the debts off.

What should I consider when registering a limited company?

Once you have found out how to register a company, it might be worth having a look at points that you should consider before deciding to incorporate a business.

• Have you chosen the right name for your business and checked if it is available? – You can check whether the name that you have come up is available with the Companies House.
• Have you considered tax implications? – Although, limited liability companies can bring significant tax advantages to some people, if you expect not to earn more than certain threshold you might encounter so-called ‘double taxation’. This occurs when your profits are firstly taxed with the corporation tax and secondly upon distribution to you, whether in the form of income tax or dividend tax.
• A limited liability company has significantly more documents to file on an annual basis than for instance a sole trader. You will need to ensure that annual return is filled with the Companies House annually. In addition, the company’s accounts need to be lodged with both the HMRC and the Companies House. If you miss any of the above you will automatically incur penalties.

Why and when should I register a company?

Companies have significant advantages over other types of businesses. Firstly, limited liability companies are common form of business when applying for financing. Secondly, your liability is limited and therefore should your business fall into debts your personal assets will be protected against creditors (unless you have provided personal guarantee). Thirdly, if you are high income earner, company can save you in tax.

You should only register a company if you know you can utilise these to the fullest extent. To ensure that you precisely know how to register a company and get the most out of it we advise you to obtain professional advice from an accountant.

In the latest of the new ways of delivering legal advice is a Skype-style video conferencing kiosk which is being piloted in a shopping centre in Peterborough. Telephone legal advice has been around for many years and on a personal level, we doubt this idea will take off, primarily as we don’t see a huge difference between this service and the telephone advice lines that have previously been tried and failed and which are not part of an overall benefits package sold through a Union for example (where the benefits are clear as the service is simply included within a range of benefits at a yearly, affordable price..

Legal services and legal advice are very personal issues and there may also be issues as to the status of brief advice given over either the telephone or video. We would have thought that solicitors who may agree to give the advice will want to be very careful in making it clear that there are limitations to a short advice session, there might be regulatory issues for the solicitors to consider and there are few legal matters which can be assisted in a meaningful way within a £30.00 phone call over 20 minutes. This is just our view, we may well be wrong and good luck to the service providers, Instant Law UK .

Apparently, the service will also be available to the public at home, using a software download. In terms of practice areas, we understand these to include family law, personal injury, immigration and employment.