Why have a separate trading subsidiary company
Many charities have trading subsidiaries.
What are the reasons for this structure?
It will be to do with VAT - plus taking on liabilities like leases etc.
To avoid tax on significant non primary purpose trading, protect charity assets, allow greater flexibility in what can be done.
The main reason is that trading is not a charitable activity - even if the purpose of trading is to generate funds for charitable purposes.
The profits of charity-owned businesses are taxable; they typically donate all of their profits to the parent charity thereby eliminating the tax charge.
And what the previous posters have said.
Only worth it if you've a significant amount of trading income, obviously.
It can be a bit of a faff. Your average trustee doesn't appreciate the importance of keeping things separate.
Volunteer trustees cause these things to get confused