What Does Being Incorporated Mean?

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IMPORTANT:  Before deciding on a legal status it is vital that you obtain professional advice.

Being incorporated means that the organisation has its own separate legal identity. This means that it is the organisation that enters into contracts, employs staff, purchases property etc. rather than individuals.

Benefits of being incorporated

  1. Limitation of risk
  2. Clear ownership structure
  3. Develops a sense of ownership
  4. Public accountability
  5. Encourages recognition by financial institutions and investors
  6. May make it easier to access equity finance

Disadvantages of being incorporated

The main disadvantage of being incorporated is the administration that is required e.g.

  • Registering the business with companies house (with the exception of SCIO which only registers with OSCR)
  • Submission of annual accounts
  • Create and maintain Memorandum and  Articles of Associations
  • Stakeholders

It makes sense for Social Enterprise organisations to adopt an incorporated status particularly if they are considering any of the following:-

  • taking on a lease
  • buying  property
  • taking on employees
  • raising finance
  • entering into large contracts
  • becoming a charity

The types of legal structures that are regarded as ‘incorporated’ are

  • Company Limited by Shares
  • Community Interest Company Limited by Shares
  • Company Limited by Guarantee
  • Company Limited by Guarantee with charitable status
  • Community Interest Company Limited by Guarantee
  • Scottish Charitable Incorporated Organisation (SCIO)

IMPORTANT:  Before deciding on a legal status it is vital that you obtain professional advice.

For further information on Incorporated status, check:-

  • SCVO Website information on Incorporated status

www.scvo.org.uk/setting-up-a-charity/decide-on-a-structure/

  • Companies House information on CLS,CLG

www.companieshouse.gov.uk

  • Office of the Regulator of Community Interest Companies

www.gov.uk/government/organisations/office-of-the-regulator-of-community-interest-companies