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What what be the right set up for an Art Centre

What might be the best structure (Company, Charity etc) for a local Art Centre

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Client has asked I about the best structure for a joint venture.

He, his sister and a friend are investigating setting up an Arts Centre to give young people access to good quality art education. They are also thinking of setting up a Foundation dedicated to their parents as a vehicle to manage the funding of the Centre and tuition for young people.

They have asked what might be the best structure to set up to manage all of this, e.g. charity, company, trust, foundation, association.

To be honest I really don't know

Wonder if anyone could help with some ideas on this so I can point them in the right direction

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By jonharris999
23rd Sep 2020 15:14

There are lots of considerations here and will be happy to discuss privately.

I would always start with the over-arching strategic objective: for-profit, or not? (short-term and long-term)

If for-profit, then apply broadly the same considerations for sole trader vs Partnership/LLP vs Ltd Co as you would for any other enterprise.

If not-for-profit, then if it is to be of any size, company limited by guarantee and regd charity is usually the way to go because it opens up so many more long-term funding doors than smaller structures.

If ambition is more limited or uncertain, then choose various smaller versions of this, accept the fundraising limitations for the time being, and plan to upgrade later.

Lots more considerations but that's a nutshell.

And....great good luck.

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By WhichTyler
23rd Sep 2020 15:24

This is useful https://www.gov.uk/set-up-a-charity

And yes, being clear about the objectives and purpose, and discussing them with a lawyer, is critical

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Cloud Computing
By ngaccounts
23rd Sep 2020 16:23

If not-for-profit, then as above, suspect you'd want to go down company limited by guarantee with registered charity status route. Combines benefits of a company (ltd liability) with benefits of a charity (funding options, gift aid reclaim etc.). Equally there are downsides to a charity so need to be sure that's what you want.

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Scalloway Castle
By scalloway
23rd Sep 2020 16:35

If they expect to be paid for their work then a charity may not be suitable.

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Replying to scalloway:
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By jonharris999
23rd Sep 2020 17:02

To an extent that's true, although i) they may not need (or not all need) to be Trustees, and ii) it is not that unusual for arts charities to pay fees to their Trustees, provided that this is permitted by the articles and that various other (quite obvious) stipulations are followed. For a well-managed charity this should not be an obstacle.

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VAT Director
By Jason Croke
25th Sep 2020 08:26

From a VAT perspective, the legal structure may influence the VAT treatment of the supplies made by the organisation.

For example, a limited by guarantee with no distribution of profit in the Articles (ie, not for profit) would see supplies of education being exempt, but if you have a for profit entity or a limited by guarantee that is silent on profit distribution, the supplies of education will likely be standard rated.

HMRC Notice 701/30 section 4. https://www.gov.uk/guidance/vat-on-education-and-vocational-training-not...

You don't say whether pupils will pay for the education or if it is funded fully via the clients personal wealth as a grant, but if there are charges made to attend, then this raises the issue of whether VAT is added to fees or not.

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Replying to Jason Croke:
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By jonharris999
25th Sep 2020 09:52

That's a good point. There is also the matter of Cultural Exemption for VAT for a charity, which is virtually automatic for most exhibitions, performances etc.

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