There are some types of community projects which require a higher level of formality due to the nature of the responsibilities they are entering into.
If you are taking over a community asset or local service, or starting a community enterprise which is based on trading and will involve managing significant amounts of money, employing staff and entering into contracts, then adopting an incorporated organisational form is highly recommended.
There are four types of incorporated legal structure most commonly adopted by community organisations and community enterprises:
- Company Ltd by Guarantee with charitable status (CLG)
- Community Interest Company (CIC)
- Community Benefit Society
- Charitable Incorporated Organisation (CIO).
These are all types of legal structure which allow you to build in community membership, accountability to your community, reinvest profits back into your community and also include an ‘asset lock’ which safeguards any assets owned by the organisation from being sold for private benefit.
The legal structure you choose is important – it can affect the type of funding or investment you can apply for, the way in which the community has a say in the running of the organisation and who benefits from the organisation’s activities.