Deciding the structure of a new venture can be confusing. If you start as an unincorporated association, you need to know that you will be carrying all the responsibilities of the organisation personally so it may be right for you to incorporate.
The six key benefits of incorporation for a social enterprise are explained on the Social Enterprise UK website.
Incorporation – the act of putting your new venture into a company – puts clear legal water between you and your venture. This means your new venture can enter contracts or agreements with others as a legal entity separate from you. The business can, in its own right, sue and be sued, employ people and make them redundant, accumulate surpluses or make losses.
However, there are some reasons why you may not want to incorporate:
- If income is tiny – Your turnover may be so low, particularly early on, that you are not putting your personal finances on the line.
- Tax advantages – As an unincorporated sole trader you can pay tax in arrears.
- Low regulation – As an unincorporated business, you are not obliged to file annual returns and accounts to Companies House.