Charities can only be established for charitable purposes, whereas a CIC can be established for any lawful purpose (apart from political causes) as long as its activities are carried out for the benefit of the community.
Here’s more detail on the differences between a CIC and a charity:
|Recognised by funding bodies||✓||✓|
|Subject to official regulation||✓||✓|
|Funded by sale of products or services||✓||✗|
|Funded by donations or grants||✓||✓|
|Allowed tax concessions||✗||✓|
|Company accounts must be audited||✗||✓|
|Directors (trustees) can be paid||✓||✗|
|Dividends can be paid (‘limited by shares’ only)||✓||✗|
|Minimum number of directors||1||3|
|Minimum annual turnover||£100||£5000|
Sale of products or services
CICs can permanently trade – something charities can’t do. This means that your main source of income could be the products or services you sell. As this isn’t possible for a charity, your CIC could be the trading arm of a charity, or it may be appropriate to set up as a CIC rather than a charity if you know that you will need this option.
Number of directors
A CIC limited by shares can have just one director and shareholder. A CIC limited by guarantee should have at least two directors (trustees). Some banks or funding bodies will prefer there to be at least three.
There is no actual stated minimum turnover for a CIC, but it is not allowed to file dormant company accounts. If there is no activity within the first two years of trading, the CIC Regulator might recommend that the company be closed.by