Are looking to set up a separate arm of your riding school to work for the benefit of the community?
Would you like to support minority groups? People with special educational needs or those with recovering from trauma?
I have been asked in my Facebook group “Grow your equestrian centre”. What is the best legal structure to use for this type of operation? A Community Interest Company (CIC) or Charitable Incorporated Organisation (CIO).
We all know that equestrian activities benefit humans on a physical and mental level. But from a funder’s perspective. When lots of riding schools are set up as partnerships and sole traders. All they will see is that proprietors are lining own pockets!
For most, this is also far from the truth, as so much money goes back into the facilities to keep them open for public use. Most large sporting facilities in your local area, swimming pools, and playing fields. Are all supported by the Local Authority to keep them operational.
So how can we open up to new legal structures, that will help more people gain access to the benefits of the horse? At the same time reducing the barriers that equestrian is only for the privileged few.
Looking into the following may help you attract funding to support your cause. But it’s important to ensure a new legal structure supports your need both now and in the future.
Community Interest Company CIO
A Community Interest Company is a company that operates for the benefit of the community.
To become a CIC you must be able to apply and show your community benefit.
As a company, directors enjoy limited liability. Directors of the company can draw a salary, but this will be listed in the public domain.
The main drawback for an equestrian CIC is the asset lock. In the equestrian world, your largest asset is the land and property, unless you rent the facility.
So what are your long-term aims?
If you want to include the property in the asset lock. Ensuring the property is retained and protected as a riding school for the future then this is ideal.
But not if selling your centre is your retirement plan – or to pass on the proceeds to the family.
You could rent out your facilities to a CIC with a long-term lease in place of at least 10 years. This would be needed to secure any funding to develop facilities. Your facilities, horses, and equipment then have a lease agreement to the CIC for the hours they are used.
A CIC provides a clear, limited company structure, for those wanting to be seen as a social enterprise rather than a charity.
As a CIC you are not eligible for rate relief whereas charities are. But it is always worth checking with your local council as each one varies around the country.
Charitable Incorporated Organisations CIO
Charitable Incorporated Organisations offer the benefits of being incorporated and having charitable status in one.
A CIO is a simple mechanism for a charity to trade although trading for a profit would still require a trading arm.
CIOs are regulated by one body – the Charities Commission. The objects must be exclusively charitable and meet the public benefit test.
If all of the club’s income is to come from gifts and grants then a CIO model may be appropriate. The problem with equestrian is a CIO is restricted on fundraising to develop property or land that could be borrowed against. Which is not ideal given the facilities to provide equestrian activity.
If you are currently set up as a charity, a CIO may reduce administration in comparison. With a charity, liabilities fall on the trustees themselves. So a CIO makes it easier for to attract volunteers to support the governance.
This structure is still relatively new and may be seen as unfamiliar to funders, banks, and donors. So worth bearing in mind if you need to raise significant funds.