What to consider when setting up a trading arm for your charity
Posted on 13th April 2023
Setting up a trading arm for your charity can be a great way to generate income and ensure sustainability for your organisation. However, there are several factors to consider before taking this step.
Here are some key considerations for small startup charities looking to set up a trading arm.
Purpose: The first thing to consider is the purpose of your trading arm. Will it be used to raise funds for your charity, or will it be an independent business with its own goals and objectives? Clearly defining the purpose of your trading arm will help you to make strategic decisions and ensure that it is aligned with the overall mission of your charity.
Legal structure: Deciding on the legal structure of your trading arm is an important step. You will need to choose between setting up a separate legal entity or operating as a subsidiary of your charity. Each option has its advantages and disadvantages, so it's important to seek legal advice before making a decision.
Funding: Setting up a trading arm can be costly, so it's important to consider how you will fund the initial startup costs. Will you be using funds from your charity, seeking investment, or applying for a loan?
Management: Who will be responsible for managing the trading arm? Will you need to hire new staff or will you be able to use existing resources? It's important to ensure that the trading arm is properly managed to ensure its success.
Product or service: Consider the product or service that your trading arm will be offering. Is there a demand for it in the market? Will it generate enough income to cover costs and make a profit? Make sure you conduct market research before making any decisions.
Compliance: There are specific compliance and regulatory requirements that must be met when setting up a trading arm. This includes compliance with the Companies Act, Charities Act, and other relevant legislation. Be sure to seek legal advice and ensure that you are meeting all necessary regulatory requirements.
Branding: Your trading arm should have a distinct brand that is separate from your charity, but still aligns with your overall mission. This will help to ensure that your trading arm is seen as a separate entity and will avoid confusion with your charity's brand.
Communication: It's important to communicate the purpose and activities of your trading arm clearly to your stakeholders, including donors, volunteers, and the general public. This will help to build trust and support for your trading arm.
In conclusion, setting up a trading arm for your charity can be a great way to generate income and ensure sustainability.
However, it's important to consider the purpose, legal structure, funding, management, product or service, compliance, branding and communication before taking this step.
By carefully evaluating these factors, small start-up charities can make informed decisions and ensure the success of their trading arm.
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