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Best legal entity to choose?

A group of artists are running a small 'pop up' shop.

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A group of artists (full disclosure one is my wife) are running a small 'pop up' shop. The instigators behind getting the venture going were a local charity.

The shop is retaining 10% of sales and donating this to the charity.

The initial venture is only going on for a couple of months - however, if they intend to carry on, what legal entity would be best suited?

Is it possible, for example, to form a CIC that is somehow mandated to 'donate' its surplus funds to a particular charity?

I suppose a normal limited company would work, but it would need to be possible to ensure that the 'donation' to this charity was able to be treated as cost of sales so it was not taxable.

There could be future grant applications etc, I suppose, and these would probably at a minimum require CIC status.

I don't think the charity themselves wish to create a trading subsidiary.

The art group is fairly independent of the charity.

Thanks,

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By mumpin
17th Sep 2020 13:10

Workers' cooperative?
All decisions made collectively.
That should prove appropriately time consuming.

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Psycho
By Wilson Philips
17th Sep 2020 13:26

Why would the donation need to be treated as cost of sales? If charity is registered, would a charge on income not achieve the same objective?

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By michaelbeaver
17th Sep 2020 13:34

It depends on how many artists there are and their appetite for admin. My husband did this before xmas last year, with just two of them. They each already ran their own businesses. They each kept the sales of their own products, and both contributed to the running of the shop for the 5 weeks it ran for. They then each accounted for the results of that project in their own businesses.

If the artists are sharing the revenues, regardless of who originally made the product, then a simple partnership could work. They could also agree upfront about how profits are to be split.

At this stage a limited company would probably be overkill, and certainly not a CIC. In 7 years of running my practice, I have yet to see a situation where a CIC did something better than a limited company could do, enough to make up for its restrictions.

In any case the proceeds to charity should be able to be a charge against income provided it's a registered charity.

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By tom123
17th Sep 2020 14:49

Thanks,

I suppose my fear (perhaps unfounded) is that the regular donation to the charity would somehow not be a valid deduction against taxable income.

Income is collected on one card machine, and then divided out.

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Replying to tom123:
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By Tax Dragon
17th Sep 2020 15:05
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Routemaster image
By tom123
17th Sep 2020 15:29

Thanks all - the good thing about Aweb is you get to rule out unknown unknowns.

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