Your legal and governance options explained

This section helps you understand the different legal forms available for co-operatives – your options and where you can get help in working out the most appropriate option for your co-operative. 

This section is more helpful if you have used our Select-a-structure tool. If you have already used the tool, scroll down to read the 'Legal forms explained' section.

If you already know what legal form you want for your co-operative, Co-operatives UK offers a comprehensive complete registration service for new co-operatives.

In order for us to help you register your co-op, there are key pieces of information we need from you:

  1. The proposed name of your co-op (link to guidance)
  2. The Co-operatives UK model you wish to adopt
  3. The registration package you wish to register with - view Co-operatives UK's advice packages.

Email [email protected] with this information and we'll release a letter of engagement.

Legal forms explained

When clicking on the legal forms below, a drop down will appear with information relating to that particular legal form. The dropdown below summarises some of the terms included in each section.

Terms and definitions

Term

Definition

Legal form

The sort of organisation yours is considered to be in the eyes of the law, for example, whether it is a company limited by guarantee or by shares, a society or an association.

Charitable status

Being a charity grants an organisation a legal status on top of its legal form. This column indicates whether or not a particular legal form may or may not have the potential to meet the requirements for charitable status.

Model Governing Document

All co-operatives will need a governing document which sets out what the co-operative is going to do, by whom and in what way. At Co-operatives UK, we provide model – or template – governing documents for certain types of organisation. For others, we provide a bespoke advice service. See the bottom of this page for more information in the next steps.

Organisational type

Your organisation may wish to be referred to as a particular type, such as co-operative, community enterprise or employee-owned business. However, in the eyes of the law an organisation is identified purely by its legal form.

Please also refer to the Glossary of common terms in our Simply Legal guide.

Please note: the below list of legal forms is alphabetical to correspond with the output of the select-a-structure tool. 

Charitable Community Benefit Society

What is a Charitable Community Benefit Society?

Community benefit societies are corporate bodies registered under the Co-operative and Community Benefit Societies Act 2014 (CCBSA2014).

This legal form is suitable for an organisation that wants to be owned and controlled democratically by a variety of stakeholders, and to operate primarily for the benefit of a wider stakeholder group.

The legal form here is the community benefit society. In addition to its legal form, this type of society may apply to HM Revenue & Customs for exempt charity status (or if registered in Scotland directly with the Office of the Scottish Charity Regulator or in Northern Ireland directly with the Charity Commission for Northern Ireland), hence ‘charitable’ community benefit society.

Legal form

Charitable status

Co-operatives UK Model Governing Document?

Community Benefit Society

Exempt Charity Model governing document for a Charitable Community Benefit Society

In additional to having a legal form, your organisation may wish to be referred to as a particular type, such as co-operative, community enterprise or employee-owned business. Read more about organisational types. Note that in the eyes of the law an organisation is identified purely by its legal form.

Additional information

Ready to register: Next steps

Charitable Company Limited by Guarantee

What is a Charitable Company Limited by Guarantee?

Company law is extremely flexible and can be used for almost any type of constitutional arrangement. Limited companies are corporate bodies registered under the Companies Act 2006, which sets out what companies can, cannot and must do. The Act specifies that a private company limited by guarantee cannot issue shares: instead, each member guarantees a certain amount (usually £1) in the event of the company being wound up with outstanding debts.

In most cases, being a charity grants an organisation a legal status on top of its legal form. This means that a company limited by guarantee (the legal form) must apply separately to the Charity Commission for charitable status as an additional process on top of registration as a company.

Legal form

Charitable status

Co-operatives UK Model Governing Document?

Company Limited by Guarantee

Registered Charity

Contact the Co-operatives UK Advice Team for advice on drawing up your governing document. 

In additional to having a legal form, your organisation may wish to be referred to as a particular type, such as co-operative, community enterprise or employee-owned business. Read more about organisational types. Note that in the eyes of the law an organisation is identified purely by its legal form.

Additional information

Ready to register: Next steps

(Scottish) Charitable Incorporated Organisation

What is a Charitable Incorporated Organisation (or, in Scotland, a Scottish Charitable Incorporated Organisation)?

A recent change in charity law created two new legal forms, the Charitable Incorporated Organisation (CIO) which is available for charities registering in England & Wales or Northern Ireland, and the Scottish Charitable Incorporated Organisation (SCIO) which is only available for charities registered in Scotland.

Until recently, most charities that require corporate status register as companies limited by guarantee (although some are societies).  This means that such charities have two regulators and as a result are required to file documents with both bodies. The CIO/SCIO provides all of the benefits of incorporation (that is limited liability and a separate legal identity) but it is only required to register and report to one regulatory body (the Charity Commission for England & Wales, the Office of the Scottish Charity Regulator depending on location).

The CIO/SCIO is most suitable for small to medium sized organisations which need to protection of limited liability because they employ staff and/or enter into contracts.

Legal form

Charitable status

Co-operatives UK Model Governing Document?

Charitable Incorporated Organisation

Registered Charity

Contact the Co-operatives UK Advice Team for advice on drawing up your governing document. 

In additional to having a legal form, your organisation may wish to be referred to as a particular type, such as co-operative, community enterprise or employee-owned business. Read more about organisational types. Note that in the eyes of the law an organisation is identified purely by its legal form.

Additional information

Ready to register: Next steps

Charitable Trust

What is a Charitable Trust?

A trust exists where one or more individuals or a single corporate trustee (the trustees) administer funds or resources which have been donated by others (the donors) for the benefit of another group of people (the beneficiaries).

A trust is an unincorporated organisation with a trust deed as its governing document. A trust that is also a charity may only be created where there is a specific asset, such as a fund of money, for the trustees to administer (although this can be a small amount for the purposes of creating the trust).This legal form is commonly considered suitable for organisations that will only be giving out grants and not carrying out charitable or other activities themselves.

In most cases, being a charity grants an organisation a legal status on top of its legal form. This means that a trust (the legal form) must apply separately to the Charity Commission for charitable status as an additional process on top of setting up the trust itself.

Legal form

Charitable status

Co-operatives UK Model Governing Document?

Charitable Trust (unincorporated)

Registered Charity

Contact the Co-operatives UK Advice Team for advice on drawing up your governing document. 

In additional to having a legal form, your organisation may wish to be referred to as a particular type, such as co-operative, community enterprise or employee-owned business. Read more about organisational types. Note that in the eyes of the law an organisation is identified purely by its legal form.

Additional information

Ready to register: Next steps

Charitable Unincorporated Association

What is a Charitable Unincorporated Association?

This is the most common form of unincorporated organisation within the social economy sector. There is no Act of Parliament defining or specifically governing these associations, but there is a large amount of case law. Being ‘unincorporated’ means that the organisation has not been registered as a legal entity (such as a ‘company’ or a ‘society’) so the law does not distinguish between the organisation and its members.

This type of organisation has been defined as: "Two or more persons bound together for one or more common purposes, not being business purposes, by mutual undertakings each having mutual duties and obligations, in an organisation which has rules which identify in whom control of it and its funds rests and on what terms and which can be joined or left at will."

In most cases, being a charity grants an organisation a legal status on top of its legal form. This means that an association (the legal form) must apply separately to the Charity Commission for charitable status as an additional process on top of setting up the association itself.

Legal form

Charitable status

Co-operatives UK Model Governing Document?

Unincorporated Association

Registered Charity (if it meets Charity Commission registration requirements)

Contact the Co-operatives UK Advice Team for advice on drawing up your governing document. 

In additional to having a legal form, your organisation may wish to be referred to as a particular type, such as co-operative, community enterprise or employee-owned business. Read more about organisational types. Note that in the eyes of the law an organisation is identified purely by its legal form.

Additional information

Ready to register: Next steps

Co-operative Society

What is a Co-operative Society?

Societies are corporate bodies registered under the Co-operative and Community Benefit Societies Act 2014 (CCBSA2014).

The co-operative society entrenches the International Co-operative Alliance Co-operative Principles. The co-operative society legal form is mainly used by consumer co-operatives, housing co-operatives and credit unions. It is often used by agricultural, worker and community co-operatives.

Usually, basic characteristics are:

  • member benefit;
  • one member, one vote;
  • return on capital must be limited, that is, societies should pay the minimum rate required to attract and retain the capital necessary for their business - the primary motive for investment should be the benefit to the member as user;
  • if profits are to be shared out among the members (not the case if a co-operative is not-for-profit), this must be done using an equitable formula; and
  • no artificial restrictions on membership.

Legal form

Charitable status

Co-operatives UK Model Governing Document?

Co-operative Society

Not available

In additional to having a legal form, your organisation may wish to be referred to as a particular type, such as co-operative, community enterprise or employee-owned business. Read more about organisational types. Note that in the eyes of the law an organisation is identified purely by its legal form.

Additional information

Ready to register: Next steps

Community Benefit Society

What is a Community Benefit Society?

Community Benefit Societies are corporate bodies registered under the Co-operative and Community Benefit Societies Act 2014 (CCBSA2014).

This legal form is suitable for an organisations that wants to be owned and controlled democratically by a variety of stakeholders, and to operate primarily for the benefit of a wider stakeholder group.

Most recently, the model has been popular among organisations seeking to galvanise local communities through ownership of community assets, such as pubs, community energy and even piers via a ‘community share offer’.

For more information on community share offers, visit the Community Shares website or in Scotland, Community Shares Scotland

Legal form

Charitable status

Co-operatives UK Model Governing Document?

Community Benefit Society

See charitable community benefit society option

In additional to having a legal form, your organisation may wish to be referred to as a particular type, such as co-operative, community enterprise or employee-owned business. Read more about organisational types. Note that in the eyes of the law an organisation is identified purely by its legal form.

Additional information

Ready to register: Next steps

Community Interest Company (limited by guarantee)

What is a Community Interest Company (limited by guarantee)?

The Companies (Audit, Investigations and Community Enterprise) Act came into force in 2005 and created a new type of legal form - the community interest company (CIC). 

This legal form is specifically designed for organisations wishing to further social objectives as a social enterprise and use their profits for the public good, but which do not require, or are not eligible for, charitable status.

There are two main features that distinguish the community interest company from other corporate forms:

  • all CICs will have a compulsory asset lock. The assets of a CIC may only be used for the benefit of the community and may only be distributed to a specific community interest company or charity, not to members or investors; and,
  • a community interest test must be passed.  An organisation will be required to demonstrate, via a community interest statement, that its purposes could be regarded by a reasonable person as being in the community or wider public interest.

A CIC limited by guarantee would have no share capital and therefore would not be eligible to issue shares.

Legal form

Charitable status

Co-operatives UK Model Governing Document?

Community Interest Company (limited by guarantee)

Not available

Community Interest Company limited by guarantee. Note that this is only suitable for a co-operative CIC limited by guarantee.

In additional to having a legal form, your organisation may wish to be referred to as a particular type, such as co-operative, community enterprise or employee-owned business. Read more about organisational types. Note that in the eyes of the law an organisation is identified purely by its legal form.

Additional information

Ready to register: Next steps

Community Interest Company (limited by shares)

What is a Community Interest Company (limited by shares)?

The Companies (Audit, Investigations and Community Enterprise) Act came into force in 2005 and created a new type of legal form - the community interest company (CIC). 

This legal form is specifically designed for organisations wishing to further social objectives as a social enterprise and use their profits for the public good, but which do not require, or are not eligible for, charitable status.

There are two main features that distinguish the community interest company from other corporate forms:

  • all CICs will have a compulsory asset lock. The assets of a CIC may only be used for the benefit of the community and may only be distributed to a specific community interest company or charity, not to members or investors; and,
  • a community interest test must be passed.  An organisation will be required to demonstrate, via a community interest statement, that its purposes could be regarded by a reasonable person as being in the community or wider public interest.

A CIC limited by shares has the option of issuing shares to its members that may pay a dividend.  In most instances such dividends are subject to a cap which is designed to strike a balance between encouraging people to invest in a CIC and the principle of community benefit. 

The rate of the dividend cap is set by the CIC Regulator subject to approval by the Secretary of State for Business, Innovation & Skills.  

Legal form

Charitable status

Co-operatives UK Model Governing Document?

Community Interest Company (limited by shares)

Not available

Community Interest Company limited by shares

In additional to having a legal form, your organisation may wish to be referred to as a particular type, such as co-operative, community enterprise or employee-owned business. Read more about organisational types. Note that in the eyes of the law an organisation is identified purely by its legal form.

Additional information

Ready to register: Next steps

Limited Liability Partnership

What is a Limited Liability Partnership?

The LLP has many of the advantages of a private company limited by shares without the restrictions of share capital. The LLP should be considered as an alternative to a private company, particularly where there are stakeholders who may need to withdraw a capital contribution. 

In recent years the LLP has become a more popular legal form for use by worker co-operatives and also as a vehicle for a number of organisations working together to further a common aim (for example, tendering together for a contract) but is not suitable for many third sector organisations due to its requirement to undertake profit making activity.

Legal form

Charitable status

Co-operatives UK Model Governing Document?

Limited Liability Partnership

Not available

Contact the Co-operatives UK Advice Team for a model LLP governing document

In additional to having a legal form, your organisation may wish to be referred to as a particular type, such as co-operative, community enterprise or employee-owned business. Read more about organisational types. Note that in the eyes of the law an organisation is identified purely by its legal form.

Additional information

Ready to register: Next steps

Partnership

What is a Partnership?

The main attraction of a partnership is that there is little or no cost involved and related administration is less burdensome. Partners are treated as self-employed for tax purposes so there is no employer’s National Insurance to pay and people's income tax is not collected until the end of the financial year.

A partnership is an unincorporated legal form. Because of this, creating a partnership does not provide limited liability so all of the partners have ‘joint and several’ personal liability for any debts.

In some cases a partnership may be a suitable starting point for very small organisations or ones that want to have a 'trial run' with their business idea before committing themselves fully.

Legal form

Charitable status

Co-operatives UK Model Governing Document?

Partnership

Not available

Contact the Co-operatives UK Advice Team for advice on drawing up your governing document.

In additional to having a legal form, your organisation may wish to be referred to as a particular type, such as co-operative, community enterprise or employee-owned business. Read more about organisational types. Note that in the eyes of the law an organisation is identified purely by its legal form.

Additional information

Ready to register: Next steps

Private Company Limited by Guarantee

What is a Private Company Limited by Guarantee?

Private limited company status is commonly used by co-operatives as an alternative to the society as company law is extremely flexible and can be used for almost any type of constitutional arrangement. Limited companies are corporate bodies registered under the Companies Act 2006, which sets out what companies can, cannot and must do.

The Act specifies that a private company limited by guarantee cannot issue shares: instead, each member guarantees a certain amount (usually £1) in the event of the company being wound up with outstanding debts. 

Legal form

Charitable status

Co-operatives UK Model Governing Document?

Private Company Limited by Guarantee

See charitable company option

In additional to having a legal form, your organisation may wish to be referred to as a particular type, such as co-operative, community enterprise or employee-owned business. Read more about organisational types. Note that in the eyes of the law an organisation is identified purely by its legal form.

Additional information

Ready to register: Next steps

Unincorporated Association (non-charity)

Unincorporated Association (non-charity)?

There is no Act of Parliament defining or specifically governing associations, but there is a large amount of case law. Being ‘unincorporated’ means that the organisation has not been registered as a legal entity (such as a ‘company’ or a ‘society’) so the law does not distinguish between the organisation and its members.

This type of organisation has been defined as: "Two or more persons bound together for one or more common purposes, not being business purposes, by mutual undertakings each having mutual duties and obligations, in an organisation which has rules which identify in whom control of it and its funds rests and on what terms and which can be joined or left at will."

Legal form

Charitable status

Co-operatives UK Model Governing Document?

Unincorporated Association (non-charity)

See charitable unincorporated association option

Contact the Co-operatives UK Advice Team for advice on drawing up your governing document 

In additional to having a legal form, your organisation may wish to be referred to as a particular type, such as co-operative, community enterprise or employee-owned business. Read more about organisational types. Note that in the eyes of the law an organisation is identified purely by its legal form.

Additional information

Ready to register: Next steps

Public Limited Company (plc)

What is a Public Limited Company (plc)

A public limited company (PLC) may issue shares to the public, for example, BT, British Gas and high street banks. This is generally used by large capital-based ventures which, if they become listed on a stock exchange, will have to follow the relevant listing rules as well as the Companies Acts.

A PLC does not have to list its shares on a stock market; the purpose of doing so is to make it easier for shareholders to buy and sell shares. For the PLC it means they have access to extra funding in terms of the capital it can raise from investments made by the general public.

Legal form

Organisational type

Co-operatives UK Model Governing Document?

Public Limited Company (plc)

For-Profit Business

No PLC service offered. Please refer to Companies House.

Additional information

  • We do not provide an advice service for the formation of PLCs. Please refer to Companies House for further information.

Charity with subsidiary company

Charity with subsidiary company

A charity that wants to carry out new activity that is non-charitable, or one that intends to undertake a new activity that may hold some risks to the charity or where a charity regularly engages in non-primary purpose trade (this means trade that is carried out directly to achieve a charity's objects, for example, charging for admissions to galleries and museums, selling educational publications and so on) will usually be advised to set up a trading subsidiary company for this purpose.

Trading subsidiaries are either:

  • ‘wholly-owned’, which means that the charity is the single member of the company and holds all of the voting rights; or
  • ‘partially-owned’, which means that the charity must hold at least 51% but less than 100% of the voting rights. 

Legal form

Charitable status

Co-operatives UK Model Governing Document?

Charity with subsidiary company

-

Contact the Co-operatives UK Advice Team for advice on drawing up your governing document.

Additional information

Ready to register: Next steps

Updated: 21/09/2017