Lesson 3 of 10
Sole trader vs limited company vs CIC vs charity
Learning objectives
- Compare the four structures on liability, tax, control and purpose
- Match structure to current stage and ambition
- Avoid changing structure for the wrong reason (vanity, funding rumour, copying others)
- Know when to seek formal advice
The four at a glance
Sole trader: simplest, personally liable, profit = income. Limited company: separate legal entity, limited liability, corporation tax + dividends, full control. CIC: limited company + asset lock + community purpose, regulated. Charity: regulated by Charity Commission, trustees, restricted trading, Gift Aid, strong fundraising position.
Match to stage
Starting solo, low risk: sole trader. Scaling, employing, contracting with organisations: limited company. Impact-first, community-funded, working with public sector: CIC. Almost entirely grant-funded with public-benefit delivery: charity. There's no 'better' — just better fits.
When to take advice
Any change of structure should go past an accountant + (for CIC/charity) a sector-specific advisor. Free advice exists via Locality, UnLtd, School for Social Entrepreneurs, Co-operatives UK and your local CVS. Use them before paying privately.
Founder insight — Derrick Twum
Most PTs we see jump from sole trader straight to CIC because a funder asked. Half regret it inside a year. The right move is almost always: get the right limited company first, then convert if the mission demands it.
Key takeaway
Pick the structure that fits today's stage and tomorrow's ambition. CIC is one of four valid answers — not the default.
Reflection questions
- 1What stage is your business actually at — solo, scaling, impact-led?
- 2What is driving any change of structure you're considering?
- 3Have you spoken to a sector advisor yet?
- 4What would change if you stayed in your current structure for another year?
Action task
Write your honest current structure and your target structure for 24 months out, with one sentence on what would have to be true to move.
Worksheet
Work through these prompts. Answers save to this device.
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Related MEM tools
- Business Planner