Want to create an agency with social impact? A CIC might be your answer.
Many of our clients are increasingly interested in creating positive social change alongside running successful businesses. If that sounds like you, a Community Interest Company (CIC) structure could be worth exploring.
What exactly is a Community Interest Company?
A CIC is basically a limited company with a social mission at its heart. Introduced in 2005, it's designed for businesses that want to use their profits and assets primarily for public good rather than purely for shareholders.
The key feature is something called an "asset lock" which ensures your company's assets (including profits) are mainly used to benefit your chosen community cause. While you can still pay dividends to shareholders, they're capped at 35% of distributable profits.
Why agencies are choosing the CIC route
As purpose-driven causes become more popular, we're seeing agencies adopt this structure to:
- Clearly demonstrate their commitment to social impact
- Access specific grants and funding only available to social enterprises
- Create a business that balances profit with purpose
- Stand out in a crowded marketplace with a genuine social mission
The benefits for your agency
1. Genuine social credentials
In an industry sometimes accused of "purpose-washing," a CIC gives you genuine credibility. Your social mission isn't just marketing talk – it's literally built into your company's legal structure.
2. Access to specific funding
Some grants and impact investment are only available to social enterprises like CICs. This can be particularly valuable when bootstrapping an agency.
3. The safety of limited liability
Just like a standard limited company, a CIC gives you the protection of limited liability, separating your personal finances from the business.
4. Familiar and flexible structure
CICs use the same basic structure as a standard limited company, making them straightforward to set up and run. They can be limited by shares (if you want shareholders) or guarantee (if you don't).
Potential downsides to consider
While we've helped several agency clients successfully establish CICs, there are some limitations to consider:
1. Dividend restrictions
The 35% cap on dividends means most profits must be reinvested in your social mission. This is great for impact, but potentially limiting if you're looking to maximise personal earnings.
2. Fewer tax advantages than charities
Unlike charities, CICs don't receive automatic tax breaks. You'll pay corporation tax like any other limited company.
3. Asset lock limitations
The asset lock means your company's assets must primarily benefit your community purpose. This includes if you ever sell the business – most of the value must go toward your social mission.
4. Extra reporting requirements
Alongside standard company accounts, you'll need to file a CIC report each year demonstrating how you've benefited your community.
Alternative structures for purpose-driven agencies
A CIC isn't your only option. Depending on your goals, you might consider:
- Standard limited company with social goals in your articles of association
- B Corp certification (like Patagonia or Ben & Jerry's) to demonstrate your commitment to balancing profit and purpose
- Charity status if your work is purely charitable (though this comes with significant restrictions)
- Cooperative model if you want to give employees ownership
Is a CIC right for your agency?
The ideal candidate for a CIC is an agency that:
- Has a clear social or environmental mission at its core
- Wants to reinvest most profits into creating impact
- Plans to access social enterprise funding streams
- Needs the credibility of a formal social enterprise structure
Get expert guidance
At Sidekick, we've helped numerous agencies structure their businesses for both profit and purpose. Setting up a CIC is relatively simple, but making sure it's the right choice for your specific situation requires expert advice.
If you're exploring options for structuring your purpose-driven agency, we'd be happy to talk through your options.
Book a session with us to discuss the best approach for your specific situation and goals.
Questions agency owners ask
What is a Community Interest Company (CIC)?
A Community Interest Company (CIC) is a limited company with a social mission at its heart. It was introduced in 2005 for businesses that want to use their profits and assets primarily for public good rather than just for shareholders. A key feature of a CIC is the 'asset lock', which ensures that the company's assets are mainly used to benefit a chosen community cause.
Why should my agency consider becoming a CIC?
Agencies are choosing the CIC structure to clearly demonstrate their commitment to social impact and to access specific grants and funding available only to social enterprises. This structure allows them to create a business that balances profit with purpose and helps them stand out in a crowded marketplace with a genuine social mission.
What are the benefits of setting up a CIC for my agency?
Setting up a CIC provides genuine social credentials, as your social mission is built into the company's legal structure. It also allows access to specific funding opportunities and offers the safety of limited liability, separating personal finances from the business. Additionally, CICs have a familiar and flexible structure, making them straightforward to set up and run.
What are the potential downsides of a CIC?
There are some limitations to consider when establishing a CIC. These include a cap on dividends at 35%, meaning most profits must be reinvested in the social mission, and fewer tax advantages compared to charities, as CICs do not receive automatic tax breaks. Additionally, there are asset lock limitations and extra reporting requirements that must be fulfilled each year.
Is a CIC the right choice for my agency?
A CIC is ideal for agencies that have a clear social or environmental mission at their core and want to reinvest most profits into creating impact. It is also suitable for those planning to access social enterprise funding streams and needing the credibility of a formal social enterprise structure.
