What is a CIC, and How is it Different to a Limited Company or Charity?

Illustration of Community Interest Company (CIC): Understanding What Is a CIC in Sports for Champions Blog

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What is a community interest company? You may have found yourself wondering before immediately navigating to google and begging the internet to solve your problems followed by finding this very blog that you’re reading right now.

Well, to answer your question; a community interest company is a business dedicated to the improvement of communities and the welfare of the general public.

“A CIC is a special type of limited company which exists to benefit the community rather than private shareholders”

Source: .GOV.UK website.

Now that you have an answer, you may also be wondering what the difference of a community interest company is in comparison to a limited company for instance. If that’s the case then stick around, because I’m going to break down what you need to know and highlight the key information.

Since I’ve already outlined what a CIC is, I should also go into some more detail, since there’s more than what meets the eye here.

To own a CIC you must fit into three qualities that must be followed;

Firstly, you have to create or present something called a community interest statement.

This is your testimony and promise to help the community and to dedicate your work and initiatives to it as well. This should be in line with the government’s guidelines.

Secondly, you must perform an ‘asset lock’, this is essentially you promising to only dedicate the company’s assets to overhead and operating costs as well as the community, this means that you will essentially pay any profits etc. to the wider community either by donating them or re-investing them into your business in order to improve your services.

Thirdly, you must create a constitution. This is, in simpler terms, a memorandum. This is a statement of your business model regarding whether your company is limited by shares, how many directors and members there will be etc. It is essentially a business model statement detailing different parts of your model such as how many directors there are along with how many members too, who makes the decisions and so on so forth.

So how does Sports for Champions fit into this?

Well, Sports for Champions is a completely non-profit organisation that seeks to inspire youth to be healthy and make a difference, they do this through using their network of athletes that host the workshops and events in schools.

For an athlete, there are many added costs on top of general living costs. Things such as equipment, travel, training, nutrition and event costs such as entry fees.

These all take a toll on athletes that are training for 35 plus hours each week, this leaves little time to rest or work in order to replenish those costs.

What we do in collaboration with those athletes allows them to earn money in order to fund these extra costs. With the use of what we call our ‘Athlete Pot’ we collect 40 percent of funds raised from each event to be able to pay them for their work in collaboration with us.

And how about a limited company?

Imagine what we do, to be a part of the CIC group, but the inverse of it all… maybe except the inspiring the younger generation part, I’m not sure how well a workshop on being the worst you can be would sell.

“Limited by shares companies are usually businesses that make a profit”

Source: .GOV.UK website.

Contrary to that of a CIC, a limited company is much less limited (funnily enough) in how they do things.

They have the pleasure of providing dividends and retaining profits, meaning that they can provide money to shareholders and extract money from the profits made to benefit themselves. This means that the shareholders can be paid meaning they can keep hold of shareholders by giving them money for being invested in the company. However, all that money has to come from somewhere, right? Right. The question is; where would the money come from?

The money would have to come from schools. If we were a limited company we would set our sights on profits and providing for shareholders etc. So, the chances are that we would charge a fee to run the events in order to pay our athletes and cover general costs. But, we also do need to create a profit to be sustainable even as a CIC, so how does it work generally for us as a CIC?

We do have to take a percentage from funds raised to finance the operational costs of our project. Since we receive no external funding and are completely independent when raising funds to support our athletes, schools and ourselves.

In the unlikely event of a school being unable to raise any money at all; we use any profit made from previous schools to help subsidise this loss, but we only ask for a fundraising attempt to be made. This can cost a school time. However, the money raised will be put back into the school and the athlete that delivers the workshop.

There is no direct cost to the school at all, and if targets are met then they will yield a profit. In cash, and with no limit as to what it can be spent on.

This marks the difference between our organisation as a community interest company and a limited company. Not to discount the work of any limited companies, of course, it all depends on what your product is and who you sell it to.

If a CIC is a non-profit organisation dedicated to the community, then what’s a charity?

A charity operates like a CIC, and with the same motives too, the difference is more in the corporate side of things. Because of the way a charity operates, you donate money and then that money is used to support whatever cause the charity is supporting, but of course, like with any business or company, there are overhead costs such as office spaces, employee wages and marketing too. This means that your money doesn’t fully go to that cause, instead it could go to trustees, and other figures in the company. However, unlike a CIC, a charity has a board of trustees that vouch for the charity and ensure the money is going towards the cause, the issue is transparency. This is because trustees are paid to testify the legitimacy of the charity.

As you can imagine, this could lead to corruption and dishonesty within some charities. This is the difference between a CIC and a charity.

Given the nature of a charity, there is always good being done, I’m not looking to discredit charities at all. However, objectively, the business model can be profitable for some members such as trustees, which ultimately is what lead Sports For Champions to become a community interest company, despite the lack of recognition as the model is still relatively new, we think that above all else, the work that we do here speaks for itself, and that the CIC label is a representation of our dedication to our initiative and motive.

With all that said, we can now confidently state that any business conducted by a community interest company (CIC) is non-profit and that of a wider initiative that benefits any community at all.

Any questions? If so, join us over on Twitter, Facebook, Instagram, and even LinkedIn!

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