What is A CIC? A Complete Guide with Updated Details

What is a CIC? The Community Interest Company, (CIC) is a clear choice if you want to start a business that isn’t just concerned with making money for owners but also works to improve the community through social entrepreneurship. However, it is critical to have a full understanding of both the pros and cons. This article examines the CIC to determine its meaning, operation, and suitability for you.

What is A Community Interest Company?

What is a CIC, or what is a community interest company? These are limited companies that strive to assist the people in the communities they serve. The main goal of a CIC is to help the community, not make money for itself. A community interest company (CIC) could be a direct welfare service for people who are vulnerable or an activity that makes money for a specific reason, like having a cafe where all the money made goes to helping the community.

Like any other business, a CIC works the same way. It has all the well-known features of a limited company, including a separate formal identity, the power to sign contracts and own property in its name, and the adaptability to borrow money and raise funds. Because it has its own formal identity, a CIC will stay in existence even if the owners or managers change. The directors have the same rights and obligations as other directors, regardless of their compensation. People will eventually come to know and trust CICs as a type of business whose social purpose they can understand.

What Are The Advantages And Disadvantages Of A Community Interest Company (CIC)?

A community interest company is a beneficial legal structure for social businesses. Besides the benefits of a limited corporation, a CIC has the following benefits:

Individual members of the CIC are not responsible for the company’s debts.
Their possessions and funds are protected.
Community interest companies are faster and easier to form than charities.
CICs may be privately held or publicly traded businesses with guarantee limitations.
The asset lock prevents CICs from misusing their funds for personal advantage. Owners can receive minor dividends as compensation.
Disbanded CICs must surrender their assets to another CIC or charity.

What is a CIC Disadvantages?

The CIC Regulator and Companies House require CIC registration.
Because individuals know more about charity, some may feel less comfortable investing in CICs.
Charities receive tax advantages and lower business rates, while community-minded companies do not.
Companies House and the CIC Regulator mandate CIC reporting.
Public documents will contain firm information.

Consider these advantages and downsides before making a good choice. Your social enterprise can be a co-op, unincorporated association, charity, CIO, sole trader, business partnership, or conventional limited company instead of a CIC.

Requirements For Setting Up A CIC:

Choose an official name for your CIC
Complete an application to register a company
Determine who your directors and members will be
Complete Form CIC36 an application to form a community interest company.
Create a memorandum and articles of association
Submitting your application
Create an asset lock
Community Interest Statement

Additionally, a potential community interest company (CIC) needs to receive approval from the organisation that oversees the CICs. At the time of this writing, the cost of registering a CIC after is now £65 online, and you can submit your application by paper for £86; a limited company can convert to a CIC for £45.

CIC Limited by Shares / Limited by Guarantee:

A CIC has to be either a company limited by shares or a company limited by guarantee.

This is the type of company that your recommended CIC would thrive in. A company limited by guarantee cannot change into a company limited by shares (or the other way around) after it has been formed.

Do you want to give donors money back?
Can you make dividend payments?
Will that help your funds or tax situation?
Know what the dividend cap means?

It limits how much a company can pay out in profits. If the answer is “yes,” you might want to select the option of sharing the limitation. A CIC limited by promise might be the best type of CIC for you if you would rather not pay dividends. In this business structure, members promise to pay the company’s bills up to a certain amount if it fails. They are only personally responsible for the company’s bills up to the amount they guaranteed.

Each of the guarantors usually backs up a small amount, like £1. However, there’s no reason why the Community Interest Company‘s biggest backer shouldn’t back up its actions by guaranteeing a higher amount. Are you going to look for money for your CIC? Donors are more likely to give money to applications from CICs limited by promise. A company limited by guarantee has traditionally been the way for businesses that don’t want to make money to give to their customers to run.

CIC Reporting Requirements:

Community interest companies, like all limited companies, have to meet certain reporting standards over their existence. Some of these are:

The Community Interest Company keeps yearly accounts and writes a report for Companies House.
The Community Interest Company regulator also sends Companies House an annual confirmation statement.
Returns of company tax for HMRC
VAT returns for HMRC, if needed.
PAYE returns for HMRC if needed.

You must also tell Companies House about any changes to the CIC’s registered information, such as the registered office address, the names of the members, and the names of people who have a lot of power.

Conclusion:

We hope this post has helped you understand what is a community interest company,or what is a CIC. And how it helps, and what it needs to do.

This is a good and becoming more popular way for social businesses to be set up, especially ones that want more freedom than nonprofits, get investors, and pay dividends to shareholders. As a commercial organisation, the Community Interest Company is excellent for social enterprises and other organisations that wish to use their earnings to support the community.

Setting up a community interest company is pretty easy, but starting a social business needs a lot of thought and planning. If you want to start a Community Interest Company, we advise you to carefully consider your options and seek professional advice before making a decision.

Disclaimer:

Please keep in mind that the information in this article is just general. It is not legal, tax, or professional advice. Although we make every effort to ensure that the information is accurate and current, you should not use it to receive individualised assistance from qualified experts.