Why we no longer want to be a Community Interest Company
Two months ago I decided to close down the SAHEL online shop and purged my grief about it in a blogpost, which a surprising number of people read. Even more unexpected – and welcome – was the ensuing rush of orders which has helped me repay some of the debt that my enterprise accrued.
I’m now in the messy process of closing down my CIC (Community Interest Company = an official social enterprise) and reverting to Sole Trader status (= a one-man band). The thing is, I should never have bothered evolving into a company in the first place. CIC status landed me with a whole load of responsibilities and no real benefits.
This isn’t another emotional goodbye post, but I feel obligated to warn any other small businesses out there thinking of becoming a CIC company. This is what I wish someone had told me before I went down that lonely road:
- Don’t do it unless you can afford an accountant. Or you don’t mind hours (no, days) working through accounts.
- Read the benefits of being a Community Interest Company before you do and see if it is really worth it. Trading as a Sole Trader is a lot more simple and your reputation will precede you – most customers don’t even know what a CIC is anyway.
- Your accounting laundry will be publicly hung out for all to see. So now everyone knows my turnover is tiny and I am being paid nothing. Transparency is not always reassuring to stakeholders.
- Understand that you will have to annually file a set of Company Accounts and a Confirmation Statement to Companies House, plus a Coporation Tax Return and probably a Self Assessment to HMRC. If you fail to deliver any of these on time there will be a hefty fine. I attended a morning by Companies House to understand my responsibilities but I still got HMRC mixed up with Companies House in my first year and it cost me £150.
- You will pay tax on any profits your CIC makes, plus any tax on anything you are paid by the company.
- You will find very little information about CICs online, because they are so rare.
- If you call for help, you will not get through to anyone at Companies House or meet anyone at a Companies House event who knows about CIC companies, because they are so rare.
- To close down the CIC and revert to Sole Trader status, you will have to stop trading as a CIC for at least 3 months. Not a moment too soon for SAHEL CIC. So here goes – this is the sound of us dropping the CIC.
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