BUSINESS STRUCTURES
Why would you register a business anyway?
READ Young Enterprise Scotland's Weekly News
While there are still significant numbers of people that operate as sole traders/ simply trade as a self employed individuals there are of course benefits to trading through a company structure/registered business.
WATCH Young Enterprise Scotland's Festival of Youth Enterprise from 2020
READ Insider's 35 under 35 rising stars of Scottish business
WATCH Young Enterprise Scotland's introduction to Circular Economy
By drawing a line between an individual
We hope the case studies below
and the work they do, company
provide a useful overview and insight to
registration provides a distinct legal
showcase the broad range of options
personality therefore offering legal
available and the reasons and
protection and protecting an individual
experiences these founders highlight
from the debts of a company (though
regarding the options available.
personal liability still exists if a business behaves in a fraudulent/negligent way).
All the case studies selected incorporate wider social and
As the case studies demonstrate there are
environmental values into their company
many different options you can consider
and the choice of legal structures
and there may be different reasons for you
highlighted helps to showcase that
to choose one structure over another. In
'being purposeful' is possible for all
addition to the core activity, how you raise
businesses moving forwards should they
finance, Governance and control, public
wish.
and wider perception and overall purpose can all lead a business founder to a different legal set up.
The Inclusive Business Models Education Project, is delivered by Young Enterprise Scotland in partnership with Co-operative Development Scotland, part of Scottish Enterprise.
Co-operative Development Scotland (CDS) is the arm of Scotland’s enterprise agencies that supports company growth through employee ownership and co-operative business models.
WHAT IS A B-CORP?
B-CORP
B Corp certification is available to all businesses that are able to meet a variety of
Take sustainability to the next level.
standards aligned with people and the environment. The standard is high such that businesses that meet high ethical targets can differentiate themselves in the wider business marketplace. Once an enterprise has gained B-Corp status it must also commit to this in its mem and arts.
Beauty Kitchen are on a mission to create the most effective, natural and sustainable beauty products in the world. Every product in their award-winning range has been designed with sustainability at its heart.
To achieve certification companies must take the B Impact Assessment. The assessment is essentially a questionnaire that asks about every detail of how a company operates. It considers diversity and equality, living wage and pay, ownership and Governance, supply chain,, customer relations and social and environmental impact.
The B-Corp assessment is repeated every three years. It is not open to registered charities and focuses on companies that operate for profit in a competitive market.
WATCH Green Elephant chatting to CEO, Jo-Anne Chidley, about being a B-Corp
Listed as one of the UKs 50 most
"We are proud to be the first high street
disruptive businesses, Beauty Kitchen was
beauty brand to become a B Corp in
established by its founder, Jo who set out
2017. Being a B Corp is so important to
to create the most effective, natural and
us and we firmly believe in using
sustainable beauty products in the world
business as a force for good - that's
where every product in their range has
why we donate 2% of sales (not profits!)
been designed with a real focus on
to charities close to our heart.
READ Forbes' interview with CEO, Jo-Anne Chidley
sustainability. All of our packaging is designed with Having pioneered the refill, reuse and
sustainability in mind. From our
repeat process, Beauty Kitchen operates
compostable pouches to using FSC
refill schemes through over 1000 stores
approved cardboard and vegetable inks
thereby reducing packaging waste. They
and recycled containers that can be
also donate to schemes that seek to
returned to us to be reused in our one of
eliminate microplastics and are
a kind closed loop scheme we truly are
registered with the Vegan Society too.
pioneers in this area. "
The Inclusive Business Models Education Project, is delivered by Young Enterprise Scotland in partnership with Co-operative Development Scotland, part of Scottish Enterprise.
Co-operative Development Scotland (CDS) is the arm of Scotland’s enterprise agencies that supports company growth through employee ownership and co-operative business models.
WHAT IS A CO-OPERATIVE?
CO-OPERATIVE
A co-op is a business or organisation that’s owned and controlled by its members, to meet
The revolution will not be motorised. The UK's most trusted bicycle & repair shop, Edinburgh Bicycle Cooperative, was founded in 1977. It is the longest established worker co-operative in Scotland, with stores in Edinburgh, Aberdeen, Newcastle, Leeds
their shared needs. The members can be its customers, employees, residents or suppliers, who have a say in how the co-op is run.
Co-operative Development Scotland helps organisations who want to use this business model in Scotland. Every co-op across the world shares the same co-operative principles and values.
Co-ops are owned by the people closest to the business. These are typically the workers, customers or local community. This means co-
and online.
ops focus not just on making a profit, but how they made it and what they do with it to bring value to their members and community. A Coop can be employee owned, community owned or based on collaboration from a number of companies coming together for a common purpose.
All kinds of businesses operate co-operatively. There are co-operative pubs, energy suppliers, taxi firms, bookstores, community gardens, wine sellers, farmers and sports clubs. There are housing co-ops, health care co-ops, cooperatives of actors, musicians, technology co-ops – and much more.
WATCH Co-operatives UK interview with previous Managing Director, Jeremy Miles
READ The Guardians's article on Edinburgh Bicycle Co-operative
At the time of Edinburgh Bicycle Co-
Employee director Ged Holmyard
op's founding in 1977, there were few
said: “We believe that working co-
bike shops in Edinburgh, and each
operatively and advocating cycling is
shop seemed to have a perpetual sign
a natural mix. Both aspire to a better
in the window – ‘Sorry No Repairs’.
future.”
Spotting a gap in the market, the
Over its early years the co-op
original founders, Gerry Murray, Chris
managed to grow from just repairing
Hill and Morag Ogilvie, decided to
bikes to start selling bicycles. By 1985
open a bicycle repair shop and
the shop had established itself as a
agreed it should be a workers' co-
retailer of quality bicycles and
operative. They opened a small repair
accessories and the co-op renamed
shop in West Crosscauseway,
itself to Edinburgh Bicycle Co-op.
Edinburgh, trading under the name “Recycles Co-operative”.
The Inclusive Business Models Education Project, is delivered by Young Enterprise Scotland in partnership with Co-operative Development Scotland, part of Scottish Enterprise.
Co-operative Development Scotland (CDS) is the arm of Scotland’s enterprise agencies that supports company growth through employee ownership and co-operative business models.
COMMUNITY INTEREST COMPANY (CIC)
WHAT IS A COMMUNITY INTEREST COMPANY? A community interest company (or CIC) is a
Smash taboos and alleviate period poverty. Hey Girls offers a buy-one, donate-one period product social enterprise. Founded by CEO Celia Hodson and her two daughters, Hey Girls produces environmentally-friendly tampons, pads, cups and pants.
special form of non-charitable limited company, which exists primarily to benefit a community or with a view to pursuing a social purpose, rather than to make a profit for shareholders.
To register a CIC you do so through the CIC Regulator. As with company registration you can register as Limited by shares or by Guarantee. Community Interest is key to registering a company of this type though this test is perhaps more liberally applied than the criteria for charitable status or even the BCorp standard.
It is also perhaps of interest to note that while dividends are payable through the CIC by Shares model they are capped for this type of structure which is defined by an ‘asset lock’. The asset lock notes that on dissolution (closure) of the business assets are not distributed to shareholders (beyond any caps in place) but must be transferred to a similar organisation.
This structure is often used by founding social entrepreneurs who, while wanting to lead an impact focused business also want to be on the payroll. This comes with much greater restrictions under the charity model.
WATCH Hey Girls' #SeeingRed Campaign Video
READ
Hey Girls was founded in 2018 in reaction
"We started with just three people, but
to the shocking statistics published the
now we have 20 members of staff
same year that 1 in 10 women and girls in
working from two dispatch hubs, one
WATC's Interview with
the UK have found themselves in period
near Edinburgh and another in Norfolk.
CEO, Celia Hodson
poverty.
We pay everyone the real living wage or more and try to employ people who are
Beyond donating and selling pads, Hey
furthest from the labour market, such as
Girls is trying to break down taboos
working mums or people re-entering the
surrounding periods. They provide schools
workforce. As well as supplying
with booklets about menstrual health,
supermarkets, eco-stores and selling
post facts and myth busters on their
online, we also supply councils,
website and social media, and hold
universities, colleges, schools and
roundtables with teens and women of all
businesses, which is very exciting. We’re
ages. Hey Girls even set up a "Hey Boys"
really committed to protecting the
page to answer boys’ questions about
environment and are constantly
periods.
improving our products to make them as sustainable as possible."
The Inclusive Business Models Education Project, is delivered by Young Enterprise Scotland in partnership with Co-operative Development Scotland, part of Scottish Enterprise.
Co-operative Development Scotland (CDS) is the arm of Scotland’s enterprise agencies that supports company growth through employee ownership and co-operative business models.
WHAT IS A B-CORP?
B-CORP
B Corp certification is available to all businesses that are able to meet a variety of standards aligned with people and the
Making ethical and style defining clothes for womxn in the world.
environment. The standard is high such that businesses that meet high ethical targets can differentiate themselves in the wider business marketplace. Once an enterprise has gained B-Corp status it must also commit to this in its mem and arts.
To achieve certification companies must take the B Impact Assessment. The assessment is
Prickly Thistle operates the only tartan weaving mill in
essentially a questionnaire that asks about
the Highland region of Scotland.
every detail of how a company operates. It considers diversity and equality, living wage and pay, ownership and Governance, supply chain,, customer relations and social and environmental impact.
The B-Corp assessment is repeated every three years. It is not open to registered charities and focuses on companies that operate for profit in a competitive market.
WATCH This video with Prickly Thistle founder Clare
Founded by Clare in her garden shed in
As the first and only B Corp certified
October 2015 with the determination to
textile mill that is also a clothing
make a positive difference by reinventing
manufacturer in Scotland they have set
in a traditional industry she knew very
themselves apart with transparency and
little about. Armed with a sewing
integrity at the heart of everything they
machine she started the Prickly Thistle
do. All textiles are woven from 100%
journey working from the only textile mill
natural fibre fabrics made in a slow
and manufacturing hub in the Highland
way, while the company is committed to
region of Scotland.
creating high quality jobs locally in
READ All about the Prickly Thistle B-Corp assessment
Scotland reintroducing weaving skills After four years of failed then successful
and to changing the rules on clothing
crowdfunding, a growing list of global
design.
supportive customers and in the face of those who said it couldn’t be done, the company is trail blazing with it’s
Prickly Thistle is proving they can make high quality, locally designed and
disruptive and relentlessly purpose-led
manufactured, styled clothes for womxn
approach.
- putting responsibility for people and planet while running a viable and growing business.
The Inclusive Business Models Education Project, is delivered by Young Enterprise Scotland in partnership with Co-operative Development Scotland, part of Scottish Enterprise.
Co-operative Development Scotland (CDS) is the arm of Scotland’s enterprise agencies that supports company growth through employee ownership and co-operative business models.
PRIVATE LIMITED COMPANY
WHAT IS A PRIVATE LIMITED COMPANY? This is by far the most well used company
A killer wardrobe without killing the planet. treen is a vegan fashion retailer, offering a selection of style must-haves from a carefully selected group of brands that make a positive difference. They sell items through both a physical and online store.
structure used throughout the UK. Registered with Companies House you will need Directors (minimum one)/ Company Secretary. Companies will set out a share structure and will have rules set out on how they operate in their Memorandum and Articles.
As well as being the most common, and therefore often the easiest for most people to understand and register, the key advantage of this model will be that with no asset lock and an ability to renumerate shareholders (utilising uncapped dividends) companies here can raise equity finance selling shares in return for a stake in the business (think Dragons Den).
While the example above does highlight a PLC which is very much values orientated (animal welfare) the focus on a wider purpose is not noted as part of its legal status.
WATCH A tour of inside treen on their instagram, @shoptreen_
READ Founded in 2018 by Cat Anderson, treen
As with many ethically focused
Meet the founder,
secured
businesses, values run throughout all
Cat Anderson
£60K at Scottish Edge in 2021
enabling them to grow and develop the
they do and treen also considers fair
business which started following a
pay and environment as well as animal
personal choice to follow a vegan diet.
testing and product materials.
A fashion graduate with over ten years experience in the retail and fashion
While the example above does highlight
industry. Cat’s transition to a vegan
a PLC which is values orientated (animal
lifestyle prompted her not only to
welfare) the focus on a wider purpose is
reassess what she was eating, but also
not noted as part of its legal status.
what she was wearing. treen was born after Cat struggled to upgrade her wardrobe to match her new lifestyle and from that the concept of treen was born.
The Inclusive Business Models Education Project, is delivered by Young Enterprise Scotland in partnership with Co-operative Development Scotland, part of Scottish Enterprise.
Co-operative Development Scotland (CDS) is the arm of Scotland’s enterprise agencies that supports company growth through employee ownership and co-operative business models.
WHAT IS A REGISTERED CHARITY
REGISTERED CHARITY
Charities are registered through OSCR (Office Scottish Charity Regulator). To be
One donation, twice the impact.
recognised as a charity an organisation will need to meet charitable objectives and have their application approved by the Regulator. They can apply directly as a SCIO (Scottish Incorporated Charity Organisation) or may already be registered as a company with Companies House and then apply for
The Turing Trust gives new life to computers donated in
charitable status.
the UK, using technology to empower disadvantaged communities in sub-Saharan Africa. It was set up in 2009 by James Turing.
A charity has to fall into one of a number of categories defined as charitable, such as the prevention or relief of poverty. Its sole purpose must be charitable and rules around trading are governed by Charity Law and overseen by the regulator. The benefit must clearly be for the general public, or a sufficient section of them.
A charity’s assets – its money and any property it holds – can only be used to further its cause. A charity can’t have owners or shareholders who benefit from it.
A charity can pay staff or purchase goods and services it needs. But only because employing those staff or purchasing those things helps to further its cause.
WATCH The Turing Trust's own Introduction video from 2015
READ Financial Times' article; Founded by Alan Turing’s family, The
"In our first 10 years we have enabled
Turing Trust seeks to continue his legacy
access to computers for over 55,000
by using technology to empower
students across Africa. With your help
disadvantaged communities. Alan is
and a great deal of hard work, we
widely regarded as the father of modern
believe that one day every child will be
computing and he saw IT as a tool for
able to enjoy the transformative power
solving immense challenges. He also had
of technology that Alan envisioned.
Gadgets that give back
a passion for helping others: he funded one member of his foster family to work in
Our current focus is to provide
Africa and sponsored a Jewish refugee’s
technology-enabled education in
schooling during World War II.
schools in Malawi in partnership with the Centre for Youth and
In honour of Alan Turing’s altruistic spirit, they refurbish IT equipment, install a range of educational software and provide it to those who need it most.
Development." The Inclusive Business Models Education Project, is delivered by Young Enterprise Scotland in partnership with Co-operative Development Scotland, part of Scottish Enterprise.
Co-operative Development Scotland (CDS) is the arm of Scotland’s enterprise agencies that supports company growth through employee ownership and co-operative business models.
WHAT IS A B-CORP?
B-CORP
B Corp certification is available to all businesses that are able to meet a variety of
Empowering people through sustainable tech
standards aligned with people and the environment. The standard is high such that businesses that meet high ethical targets can differentiate themselves in the wider business marketplace. Once an enterprise has gained B-Corp status it must also commit to this in its mem and arts.
SolarisKit is a cleantech company based in Dundee To achieve certification companies must take
Scotland that has designed, developed, and
the B Impact Assessment. The assessment is
manufactures the world's first flat-packable, self-
essentially a questionnaire that asks about every detail of how a company operates. It
assembled solar collector.
considers diversity and equality, living wage and pay, ownership and Governance, supply chain,, customer relations and social and environmental impact.
The B-Corp assessment is repeated every three years. It is not open to registered charities and focuses on companies that operate for profit in a competitive market.
WATCH This video case study all about Solaris Kit
After realising that carbon emissions from
"SolarisKit received its first big boost
the developing and emerging economies
winning Scotland’s national Converge
exceeded those produced from the
Impact Challenge in 2019 providing
industrialised nations, SolarisKit’s founder
£20,000 of funding and access to
Faisal Ghani decided the most impactful
greater access to Scotland’s
way to tackle the climate emergency was
entrepreneurial eco-system. Further
through simple and practical clean
funding from Innovate UK (
energy solutions.
been awarded to SolarisKit to carry out
READ This Scotsman article featuring Solaris kit and their work in Rwanda.
£242K) has
pilot installations of the SolarisKit solar With nearly 50% of global energy
collector in Rwanda. SolarisKit was
consumed to generate heat, Faisal
named ‘Start-up of the year’ at the
worked on a new way of providing
2020 Solar & Storage Live Awards.
affordable, clean heat. This led to the development of the world’s first flatpackable solar thermal collector and the birth of SolarisKit.
The Inclusive Business Models Education Project, is delivered by Young Enterprise Scotland in partnership with Co-operative Development Scotland, part of Scottish Enterprise.
Co-operative Development Scotland (CDS) is the arm of Scotland’s enterprise agencies that supports company growth through employee ownership and co-operative business models.
INCLUSIVE BUSINESS MODELS PROJECT GLOSSARY
Articles of Association: a set of rules that define the structure of a UK company and must be registered with Companies House for a business to be incorporated. Assets: a financial term for the economic resources a business possesses. Assets can be tangible or intangible but they must produce value for the firm. Capital: an economic term for a resource that is used to produce goods and services. From a financial perspective, capital refers to the money required by a business to finance its operations. Capitalism: an economic system where the means of production are privately owned and operated for profit. Common ownership: a principle that ensures that the assets of an organisation are held indivisibly i.e. cannot be distributed amongst individual owners. Common shares: are forms of corporate equity ownership. Individuals who purchase common shares in an organisation are granted the right to participate in governance and profit in proportion to the amount of shares the Community Interest Company (CIC): a new company form intended as a brand for social enterprise in the UK. It can be registered as a company limited by guarantee (CLG) or company limited by shares (CLS), has limited profit distribution and an asset lock. Competitive advantage: a strategic benefit one organisation has over its competitors. Competitive advantages are created by providing more value to your customers than your competitors can. Consumer co-operative: a co-operative whose membership is made up of those who purchase the goods/services of the business. Conventional business/company: see investor-owned business. Co-operative advantage: the strategic benefit co-operatives have over other forms of enterprise; a co-operative advantage is derived from the unique ownership and governance structure of the business.
INCLUSIVE BUSINESS MODELS PROJECT GLOSSARY
Co-operative Development Scotland (CDS): a subsidiary of Scottish Enterprise, CDS provides support and development services to the co-operative sector in Scotland. Co-operatives UK: is the UK-wide trade body that campaigns for co-operation and works to promote, develop and unite co-operative enterprises. Corporate governance: a system for directing, controlling and administering companies. Credit union: a type of not-for-profit, consumer co-operative that provides savings, credit and other financial services to its members. Direct democracy: a form of democracy where people collectively make decisions for themselves, rather than through elected representatives. Director: an elected or appointed member of the governing body (board of directors) of an organisation. Dividend: a payment made by a business to its shareholders. Payments are usually based on the amount of shares an investor owns. In co-operative terms, dividend refers to the share of surplus a member receives from the cooperative (see Patronage refund). Employee-owned businesses: organisations that are partially or entirely owned by their employees. Equity: another term for the shares or stock in a company. It can also refer to the concept of fairness. Fair trade: a social movement that campaigns for the equitable remuneration of producers in developing countries. Under Fairtrade certification, producers are guaranteed a premium price for their produce. Federation: a union of autonomous organisations that associate together for a common purpose. Examples of co-operative federations include Cooperatives UK and the International Co-operative Alliance.
INCLUSIVE BUSINESS MODELS PROJECT GLOSSARY
Hybrid co-operative: a co-operative whose membership consists of more than one type of member e.g. a co-operative whose members are drawn from consumers and workers. May also be referred to as a multi-stakeholder cooperative. International Co-operative Alliance (ICA): is an independent, nongovernmental association which unites, represents and serves co-operatives worldwide. Founded in 1895, ICA has 269 member organisations from 97 countries active in all sectors of the economy. Industrial and Provident Society: an organisation that is registered under the Industrial and Provident Societies Act in the UK. Co-operatives have traditionally registered as Industrial and Provident Societies. Investor-owned business: an organisation where ownership, control and beneficiary rights are granted to those who invest capital in the business. Member: a person that belongs to a group or organisation. Co-operative members jointly own and democratically control the enterprise. Patronage refund: the entitlement a member has to the surplus generated by the co-operative; a member’s share of the surplus is based on the amount of trade they conducted with the co-operative in a year. It is more commonly referred to as ‘dividend’ in the UK. Preference shares: are special types of share that usually carry no voting rights but have priority over ordinary shares when it comes to the distribution of dividends (or assets in the case of dissolution). Price/earnings ratio: a measure of the price paid for a share relative to the annual net income or profit earned by the firm per share. Primary co-operative: a co-operative that serves its members directly. An example of a primary co-operative would be a local co-operative that sells groceries directly to its members. Profit/surplus: the amount of revenue left over after all costs, depreciation and taxes have been taken into account. In co-operatives, the profit generated by the business is known as the surplus.
INCLUSIVE BUSINESS MODELS PROJECT GLOSSARY
Proportionality: the practice of measuring and distributing effort/reward based on the ratio of one element to another. Co-operatives distribute surpluses based on the amount of input a member contributed to the business. Rochdale Pioneers: a consumer society established in the town of Rochdale, England in 1844, they are widely cited as the first example of a co-operative enterprise as we know it today (with values and principles) . Rules: the equivalent term in an Industrial & Provident Society co-operative for the Articles of Association of a company Secondary co-operative: a co-operative whose membership consists of other co-operatives. The Co-operative Group was originally set up purely as a secondary co-operative (the Co-operative Wholesale Society) to service the buying needs of its consumer society members. Social enterprise: a form of organisation whose primary purpose in trading is to achieve social objectives rather than maximise profits. Society: a term for an organisation that is established under the Industrial and Provident Societies or Friendly Societies Acts in the UK Trustee: a trustee is a person, whose role is defined in law, who manages an asset (which is held in a trust) on behalf of a beneficiary. Unallocated patronage: the amount of surplus generated by member trade that is retained by a co-operative for business purposes. The members have no claim to this portion of the surplus. Unincorporated: refers to an organisation that has not registered its Rules or Articles of Association with the relevant legal body. Individuals in an unincorporated organisation remain personally liable for any losses/debt. Worker co-operative: a co-operative whose membership consists of those who work in the business.