So, you’ve decided to start a community organisation in Bradford district. This next step is to choose a legal structure but you might be thinking “So many options! How do we choose?”

The first decision to make when choosing a legal structure is incorporated or unincorporated? So what is the difference?

Unincorporated groups have no legal status so cannot sign contracts in the organisation’s name. Instead, the individual committee members or trustees have unlimited liability and can be taken to court, for example if there is an employee or creditor dispute. The individual committee members or trustees sign any contracts in their own name because in law, even if there is a written constitution, unincorporated groups have no legal standing.

Incorporated groups have a legal status so they can sign contracts in the name of the group. Committee members or trustees that are in charge of an incorporated organisation have limited liability and in most cases it is the organisation that would be taken to court, for example in an employee or creditor dispute.

Your group is incorporated if it is officially registered as:

• A company limited by guarantee – registered at Companies House
• A charitable company – registered at Companies House and the Charity Commission
• A charitable incorporated organisation (CIO) – registered at the Charity Commission
• A community interest company (CIC) – registered at Companies House by the CIC Regulator
• A cooperative society or community benefit society – registered by the Financial Conduct Authority

Limited liability does not start until the group is officially registered. You cannot call your group a limited company, charitable incorporated organisation or community interest company before it is registered.

Only organisations that are charitable can call themselves a charity. A community interest company (CIC) is never a charity and should never be described as one.

• How to register a company limited by guarantee
• How to register a community interest company (CIC)
• How to register a charity
• How to register a cooperative society or community benefit society
  

You may be thinking – What about Social Enterprise?

Write the governing document

Now you’ve chosen a legal structure, the next step is to use a template to write the governing document.

For an unincorporated association, start with the unincorporated small charity constitution. Use the Word version of the unincorporated small charity constitution to edit and adapt it to fit your group.

For incorporated organisations, start with documents from the regulator to make the process easier and quicker:

• Template governing documents for a company limited by guarantee
• Template governing documents for a community interest company (CIC)
• Template governing documents for a charity

Next steps! Learn about making decisions and writing policies.

Option! Read our guide to charity registration.

How Community Action can help

Need to talk through your options? If the community organisation will be in Bradford district UK (including Shipley, Ilkley, Bingley and Keighley), Community Action can help.

Make an appointment to talk to one of our development officers or book a place on the next Set up a New Group course. For organisations with an annual income under £100,000 advice and getting started training courses are free of charge.

Want to start a for-profit business or be a sole trader? Sorry, Community Action doesn’t provide advice to those groups.

Social Enterprise is not a legal status. Think of it as an activity instead. The enterprise part is trading. Are you going to sell a service, charge people or organisations, get contracts or investments? If you’re not, and you want to be 100% funded by grants, then that’s not enterprise, it is being a charity.

In fact many charities are enterprising, trading and are funded by a mixture of different types of funding (not just grants!). This mixture of funding and increase in selling services or goods has been driven by a reduction in public funding and high competition for grants. It is very unusual to find a community group of any kind that is 100% funded by grants and it isn’t a realistic ambition for a new organisation.

Organisations that trade for social benefit (social enterprises) can use any kind of legal structure. The choice depends on what kind of trading you want to do and who you want to have power and be involved in making decisions.

For more information, read the Social Enterprise UK guide to starting a social enterprise and government advice on setting up a social enterprise.