28 Limited Liability Partnership (LLP) An LLP is really a hybrid of a partnership and a limited company. Unlike in an ordinary partnership, each partner's liability is limited to the money they have invested in the business and the amount of personal guarantees they have given to raise finance. At least two of the partners must be designated members, which means they have extra responsibilities. LLPs must register at Companies House and file annual returns. If you are a member of an LLP the profits you make are taxable, as they would be if you were a self-employed person. Find out more about Limited Liability Partnerships at gov.uk/guidance/set-up-and-run-a-limited-liability-partnership-llp
29 Charities A charity is a legally defined entity with specific obligations and privileges. In the UK, a charity is an organisation established for charitable purposes only and must operate for the public benefit. These purposes are defined by law and include things like: • Relief of poverty. • Advancement of education or religion. • Promotion of health, arts, culture, science, or environmental protection. • Support for the disadvantaged, such as due to age, illness, or disability. • Human rights and community development. Charities cannot be set up for political purposes or private gain. Their activities must align with their stated charitable objectives. Legal Form Description Unincorporated Association Informal structure, governed by a constitution. Trustees are personally liable. Charitable Trust Managed by trustees under a trust deed. Common for grant-giving bodies. Charitable Company (Limited by Guarantee) Incorporated under company law. Offers limited liability to trustees. Must register with Companies House. Charitable Incorporated Organisation (CIO) A newer legal form combining charity and corporate status. Regulated solely by the Charity Commission. All charities must register with the Charity Commission (unless exempt) and comply with the Charities Act 2011, which governs their operations, reporting, and public accountability. Charities are subject to: • Oversight by the Charity Commission. • Legal obligations under the Charities Act, Trustee Acts, and sometimes the Companies Act. • Requirements for annual reporting, financial transparency, and governance standards. Some charities also qualify for tax benefits and Gift Aid if recognised by HMRC. Legal Status of Charities Charities in the UK can take several legal forms, each with its own structure and responsibilities:
30
Social Enterprises
Company Limited by Guarantee (CLG)
Structure:
Incorporated company with members acting as guarantors.
Best for:
Charities, community organisations, and social enterprises focused on
reinvestment.
Advantages
• Limited liability.
• Suitable for access to Third Sector funding
opportunities.
• Can apply for charitable status.
Disadvantages
• Cannot issue shares.
• Profit distribution is restricted.
Company Limited by Shares
Structure:
Standard commercial company owned by shareholders.
Best for:
Social ventures with a commercial edge and investor interest.
Advantages
• Can raise equity finance.
• Flexible trading.
Disadvantages
• Profit-driven.
• Not usually eligible for charitable status.
• Is unlikely to get access to third sector
funding opportunities.
Social enterprises are businesses which trade for social or environmental purpose.
Social enterprises prioritise benefit to people and planet and use most of any profit to
further their mission.
Social enterprises can take on a variety of legal structures depending on their goals,
funding sources, and governance. Below are the main ones.
When selecting a structure, consider:
• Your mission and whether you want charitable status.
• How you’ll fund the enterprise.
• Whether you want to protect individuals from liability.
• How much control you want to keep.
31 Community Interest Company (CIC) Structure: Limited company with a special ‘community interest’ test. Can be either a Company Limited by Guarantee or by Shares. Best for: Enterprises with a clear social mission and trading model. Advantages • Asset lock ensures profits benefit the community. • Limited liability. • Regulated by the CIC Regulator. Disadvantages • Cannot be a charity. • Some restrictions on profit distribution. For more information on CICs: • CIC business activities: forms and step-by-step guidelines - GOV.UK • Community Interest Companies Guidance - GOV.UK For more information on choosing the right legal structure for you and other legal structures: • Determining the Right Legal Structure For Your Social Venture | UnLtd • Choosing a Legal Structure for your Social Enterprise youtube.com/watch?v=mA0MP0gdn3Q • Setting up a social enterprise - GOV.UK gov.uk/set-up-a-social-enterprise cemal ezel Change Please
32 Intellectual Property (IP) – Protect your business Copyright Artistic works such as paintings, books, films and music Trademarks Words or logo that indicate the origin of a product or service Designs The distinctive look of a product, pattern, or of packaging Patents How something works or the process of making it Trade secrets and know-how Processes, techniques, special skills, methods and practical knowledge. Copyright If you create anything for your business, from product descriptions and photography to blog posts, you own the copyright of that material. You should indicate this with a copyright statement. You can use the © symbol and include the name of the person or company that holds the copyright as well as the year of creation. If you have someone else make something for you, such as a logo, your contract with them should transfer the copyright to you. The copyright status of material created by generative AI is unclear. If you wish to reduce future uncertainty, rework this material yourself. Find out more about copyright at regular workshops and one-to-one sessions run by the BIPC. Discover these at bl.uk/bipc ‘Intellectual property law regulates the creation, use and exploitation of mental or creative labour.’ (Intellectual Property Law, Bentley & Sherman 3rd ed. 2009) It’s important to understand if your business idea needs to be protected, and if so, what the most appropriate method would be. Here are some examples of intellectual property and intellectual property protections. 33 Trademarks Whatever name you use for your business is your trademark. Before trading under any name you should ensure that the one you want to use is not already in use. It’s important to be unique. You can use the symbol for an unregistered trademark (TM) to indicate you are trading under your name. This is placed after the name in superscript, as in Betty’s Best Business™. A registered trademark offers you stronger protection. You can register your trademark with the Intellectual Property Office. A trademark needs to be renewed every 10 years. Once you have been granted a trademark by the IPO, you can use the symbol for a registered trademark (R) to indicate this. This is placed after the trademarked name or phrase in superscript, as in Betty’s Best Business®. Find out how to register a trademark at gov.uk/how-to-register-a-trade-mark Find out more about trademarks at regular workshops and one-to-one sessions run by the BIPC. Discover these at bl.uk/bipc
34 Registered and Unregistered Designs Anything that is designed is protected as an unregistered design. This protects the appearance of a product or packaging, such as its overall shape and/or surface pattern. Registering your design provides stronger protection against other businesses copying your products and physical brand assets. Find out how to register a design at gov.uk/register-a-design Find out more about trademarks at regular workshops and one-to-one sessions run by the BIPC. Discover these at bl.uk/bipc Patents A patent protects an invention. It can be renewed for up to 25 years. You must ensure that your invention has not already been discovered. This is called a prior art search. If you believe you have an invention that could be patented, it is important not to reveal it to anyone. Only speak about it to a patent attorney or ask for general advice at the BIPC. For further information on getting a patent for your invention go to gov.uk/patent-your-invention Find out more about patents at regular workshops and one-to-one sessions run by the BIPC. Discover these at bl.uk/bipc Trade secrets and know-how The main purpose of trade secrets is that they remain confidential, as this provides a clear advantage to the business. They cover specific pieces of information about your business that gives you a competitive advantage. For example, outsiders might know which herbs and spices go into Kentucky Fried Chicken but they wouldn’t know the composition, exact amounts of each ingredient or how the dish is made. This is the business’s secret ‘know-how’. • Trade secrets protect the day-to-day running of your business or manufacturing process. • It’s important to keep some specific processes, client lists and other relevant information confidential. • Trade secrets can have perpetual protection. • You can use non-disclosure agreements to protect trade secrets. • It’s free to keep your trade secrets confidential. 35 David Buddies for All CIC is a buddying scheme that supports disabled people with activities in London, both face-to-face and online. We offer support to people with physical, sensory and hidden disabilities, such as chronic illnesses or neurological conditions, aged 18 – 65. We match our volunteer buddies with our beneficiaries based on their likes, dislikes and interests to enable both parties to develop an organic relationship and support each other equally. Social activities could include going for a walk, meeting for a coffee or going to the cinema. I originally benefited from the BIPC’s start-up programme which helped me develop Buddies for All from an idea into a sustainable venture. I have also been able to access the various services they offer such as the COBRA database and GrantFinder, which has definitely been beneficial for my business journey. david bourroughs Buddies for All CIC
36 Finance Income and costs When setting up a business it’s important to plan financial considerations and manage cash flow. It’s possible to start your business with fairly low costs as numerous tools and software are available for free online. It’s important to understand what income is. When you take in money for goods or services, this is called turnover. It’s the total value of all sales before expenses or taxes. It’s important to keep track of turnover and calculate profit from it. The following are examples of income: • Leading a leather working workshop to teach others how to make shoes = £300 per workshop. • Creating bespoke keychains from the scrap / excess leather from the shoes = £10 per item. Costs are the expenses your business has to meet in order to deliver a product and/or service. Just as when you create a personal budget, you need to consider everything that will cost money, including the value of your time. Hidden costs add up. When you understand exactly how much your goods or services will cost, you can set your prices. If you don’t charge enough, you might lose money on every sale. The following are examples of costs. • Half-day rent of maker space to make keychains and leather accessories = £25 p/h. • Sourcing vegan leather from Liverpool Street market = £100 for six yards. Watch these step-by-step video guides to understand key principles of financial statements: 1. Profit and loss preparation (book-keeping) – youtube.com/watch?v=i8RIh04AaD8 2. Cash flow preparation – youtube.com/watch?v=DiVPAjgmnj0 3. Balance sheet preparation – youtube.com/watch?v=CMv1zlZhb4Q You can download a free cash flow forecast Excel spreadsheet from the British Business Bank: startuploans.co.uk/support-and- guidance/business-guidance/business- planning-templates/cash-flow-forecast- template 37 Fundraising, grants, crowdfunding and loans There are several common ways to fund a start-up. These include self-funding (using personal savings), friends and family, loans (banks, start-up loans, peer-to-peer), investment, grants (tech or local council or restricted to charities) and crowdfunding. You will need to apply to receive a grant. Depending on the grant, applications can be quite complicated and success is not guaranteed. You will need to have a full business plan and, depending on the grant, give a complete account of how the grant money will be spent. Many grants also require a post-grant report to the granting body to evaluate the impact of the grant. Unless specified, grants will aim to work with established businesses. Most grants are restricted to charitable businesses. Loans are awarded by banks on the merits of your business plan. You should only take out a loan if you have a plan to repay it using your business’s profits. Start-up loans are available through a government scheme at gov.uk/apply-start-up-loan Unlike a business loan, this is an unsecured personal loan. You’ll need to pass a credit check. You’ll get free support and guidance to help write your business plan, and successful applicants receive up to 12 months of free mentoring. Crowdfunding can be a great option to raise money if you have a product that will appeal to a highly motivated niche market (board games are a good example). You can find out more about grants at workshops and one-to-one sessions run by the BIPC bl.uk/bipc