Odds are that at some point during your professional life as an accountant you will come across what is termed a ‘not-for-profit’ (NFP) company, explains Jennifer Adams.
Queries placed in past Any Answers show that most at least know that these companies exist but problems can occur if not met on a regular basis. This article attempts to assist by bringing together the most relevant points in a short text indicating websites where further information can be found.
Various types of company can be used as NFP - the differences are listed below.
Ordinary Limited Companies
Companies can be run for a social purpose and still make a profit. These companies are set up in the usual way via form IN01 being either limited by shares or more usually by guarantee using the same proforma memorandum and articles, as per the Companies House website. The company is then run as any other company - paying dividends (if limited by shares) and salaries, submitting accounts and returns, paying corporation tax on profits and registering for VAT as necessary. The only difference is an additional clause to the articles stating that the object of the company is for a social purpose (new companies automatically have unrestricted objects unless a specific cause is detailed).
Jennifer Adams FCIS TEP ATT (Fellow) is Associate Editor at AccountingWEB. A professional business author specialising in corporate governance and taxation, she has written for many of the leading specialist providers of legal, tax and regulatory publications. Jennifer runs her own accounting and consultancy business with offices based in Surrey and Dorset.