Starting a Community Interest Company (CIC): What Founders Need to Know

More and more social entrepreneurs are choosing to register as Community Interest Companies (CICs), a unique legal structure that blends commercial flexibility with community purpose.

At Third Sector Experts International, we’ve supported hundreds of founders through CIC registration, governance, and early-stage growth. Below, we outline how to start a CIC, what structure to choose, and what to expect once your organisation is registered.

What Exactly Is a CIC?

A Community Interest Company (CIC) is a type of limited company that exists to benefit the community, not private shareholders. It’s a legal middle ground between a standard business and a registered charity.

CICs are commonly used by:

• Social entrepreneurs who want to pay themselves a salary.

• Community projects seeking grant funding and trading income.

• Charities setting up trading subsidiaries.

Unlike a charity, a CIC can trade freely, distribute limited profits, and operate with fewer restrictions, but it must consistently demonstrate community benefit.

CIC vs Charity: Which Is Right for You?

Both structures can serve a social purpose, but they differ in tax treatment, governance, and funding options.

At Third Sector Experts International, we often advise clients who want both flexibility and credibility to start with a CIC limited by guarantee, which funders see as close to a charitable model but without the red tape.

Meeting the Community Interest Test

Every CIC application must pass the community interest test, which asks a simple but essential question:

“Would a reasonable person consider your activities to benefit the community?”

This test is part of your CIC36 Form, which you’ll submit with your registration. You must clearly explain:

• What your CIC does,

• Who it benefits, and

• How any surplus or assets are used for the public good.

From experience, we find that many applications fail because founders describe what they do, not who benefits or how the benefit is delivered. Our compliance team helps clients write statements that make the community impact unmistakable.

Choosing Your Structure: Shares or Guarantee

You can form a CIC in one of two ways: limited by shares or limited by guarantee. The choice depends on your goals.

CIC Limited by Shares

Best for social enterprises that trade commercially or attract investors.

• Ownership is divided into shares.

• Dividends can be paid but are capped by regulation.

• Shareholders retain control proportionate to their holdings.

This model suits social businesses with a clear commercial model and plans for growth or investment.

CIC Limited by Guarantee

Preferred for community-led or charitable-style organisations.

• No shareholders only members who act as guarantors (usually for £1).

• All profits are reinvested in community benefit.

• Seen as lower risk and more funder-friendly.

In practice, around 80% of CICs registered through Third Sector Experts International are limited by guarantee, reflecting funders’ preference for non-profit governance models.

Tax and Compliance Considerations

A CIC is still a company, so it must pay Corporation Tax on its profits, unless those profits are donated to a registered charity.

Key financial duties include:

• Registering for Corporation Tax within 3 months of trading.

• Filing annual accounts and a confirmation statement with Companies House.

• Completing an annual CIC34 report explaining how you’ve benefited the community and upheld the asset lock.
  

Unlike charities, CICs don’t receive automatic tax exemptions but they can offset legitimate business expenses and deduct charitable donations.

Tip: Many founders run a CIC and a charity side by side the CIC trades and the charity receives Gift Aid–eligible donations. We help structure these relationships safely and compliantly.

Donations and Gift Aid

A CIC cannot claim Gift Aid on donations, and donors cannot claim tax relief. However, if your CIC donates profits to a registered charity, that donation can be deducted from your taxable profits.

For social entrepreneurs balancing trading income and philanthropy, this structure can be extremely effective, allowing you to generate income and still support charitable work in a tax-efficient way.

Registering a CIC: Step by Step

To register, you’ll need to submit your application to Companies House along with:

1. Your CIC36 Form (community interest statement).

2. A Memorandum and Articles of Association including the asset lock clause.

3. Details of your directors, shareholders/members, and PSCs.

4. A registered office address in the UK.

5. The £65 online filing fee.

Most of our clients receive approval within 5 working days, provided the documents meet CIC Regulator standards.

After Registration: Staying Compliant

Once registered, you’ll have a few key ongoing duties:

• File your CIC Report and annual accounts every year.

• Keep Companies House updated with any director or PSC changes.

• Verify all director identities from 18 November 2025, under the new ID verification rules.

• Maintain proper board minutes and governance records.

Regular compliance reviews ensure your CIC remains credible, fundable, and regulator-ready.

Building Your CIC for Success

A CIC’s credibility grows from transparency. That means clear financial systems, open communication about impact, and strong board oversight.

At Third Sector Experts International, we encourage clients to:

• Create an impact measurement framework from the outset.

• Develop a governance calendar for reporting and board reviews.

• Publish an annual impact summary alongside your accounts, funders and community members appreciate the accountability.

Next Steps

Starting a CIC is more than a registration form; it’s a strategic decision about how to balance income, impact, and independence.

If you’re ready to formalise your social enterprise, make sure you start on the right foundation.

Download our free CIC Start-Up Checklist to guide you from idea to incorporation, or contact Third Sector Experts International for tailored support.