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Coddan CPM Ltd. – Company Registration Agent in the UK

Understand how a charitable CLG and potential trading subsidiary can fit together, decide whether separate commercial structure is appropriate, and plan the next stage.

Step 1
Understand Your Structure
Step 2
Assess Commercial Activity
Step 3
Compare Trading Routes
Step 4
Plan Two-Company Governance
Step 5
Establish Appropriate Companies
Step 6
Review Ongoing Structure
Companies Registry's e-Services Portal Non-For-Profit Companies Non-Profit & CLG Advisory Company Limited by Guarantee for Charitable Purposes + Trading Subsidiary

Company Limited by Guarantee for Charitable Purposes + Trading Subsidiary

Charitable CLG & Trading Subsidiary Formation

Form a Charitable CLG and Plan for Trading

Start with a company limited by guarantee (CLG) formed for charitable purposes. If your organisation also plans to trade, we can help you consider the formation steps for a separate trading subsidiary where that is the appropriate route.

The CLG and trading company have different roles and their own obligations. The right arrangement depends on what you will sell, whether the activity furthers your charitable purposes, its scale and risk, and your plans. You can start with the CLG and discuss the subsidiary when it is needed. For a charity in England and Wales, significant risk from non-primary-purpose trading requires a trading subsidiary.

Need practical help establishing the charitable CLG before considering the trading structure? Explore Coddan's CLG formation support to consider the appropriate company structure and formation route before deciding whether a separate trading subsidiary is needed.

Clear first step — Choose your CLG formation option Separate company — Add a trading subsidiary where appropriate A person to speak to — Discuss an unusual trading plan before ordering

Unsure whether you need a CLG alone or a separate trading company? Speak to Coddan about the formation options and the scope and price of any additional work before you order. Call +44 (0) 207 935 5171 or 0330 808 0089, or email info@coddan.co.uk.

Secure Online Ordering & Data Protection — Coddan's online order forms use SSL/TLS encryption to help protect information transmitted through our website. Personal information is handled in accordance with applicable UK GDPR and data protection requirements.

Professional CLG Formation and Trading Company Support

A charitable-purpose CLG can provide the corporate foundation for your organisation. A trading subsidiary, if required or chosen, is a separate company owned and controlled by the charity to carry on trading. Forming the CLG alone does not automatically form or register a subsidiary, or confer charity status.

Coddan CPM Ltd is an Authorised Corporate Service Provider (ACSP) and a Trust and Company Service Provider (TCSP). We provide corporate formation and related support within the agreed scope of each service. Tell us about a non-standard plan so we can explain the available formation route and any additional work and cost.

The subsidiary may be formed later if appropriate, but trustees must assess the proposed trading and risk before proceeding. Companies House, HMRC and the relevant charity regulator make their respective statutory decisions. Specialist legal, tax or charity-law questions may require advice from a suitably qualified adviser.

ACSP Authorised corporate service provider support within the applicable framework.
TCSP Professional trust and corporate services within the agreed service scope.
Separate Structure A trading subsidiary is a separate company with its own corporate obligations.
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Start Your Business Today: Fast Formation Services to Meet All Compliance Standards
£249.00
+VAT

Charitable CLG Essential™

Recommended for

1
package

Buy Now Essential Charitable CLG Formation — £249 + VAT. Including the Companies House fee · A straightforward professional starting point for your charitable and potential trading structure
Charitable CLG Essential™ is designed for founders and new purpose-led organisations that already understand their intended charitable purpose and want to establish their Company Limited by Guarantee as the foundation of their organisation. You provide the proposed company name, directors, members or guarantors and relevant organisational information; Coddan reviews the information, prepares the formation and submits the incorporation to Companies House within the agreed scope. If you later determine that a separate trading subsidiary is appropriate for substantial commercial activity, its formation and related corporate support can be considered separately.

Flexible Charitable CLG Formation for a Future Trading Structure
The formation can accommodate one or more directors, individual or corporate members/guarantors and mixed participation, where applicable. Your proposed charitable purposes and company objects can be considered within the agreed formation scope. An initial consultation is available by email, telephone or video call. Coddan professionally reviews your formation information before submission and provides digital incorporation documents following successful registration. The Charitable CLG can provide the corporate foundation for your organisation, while a separate trading subsidiary can be considered later if the scale, nature or risk of commercial activity makes a separate company appropriate.
Included:
• CLG incorporation and Companies House registration
• £100 Companies House filing fee
• One or more directors
• Individual or corporate members/guarantors, where applicable
• Proposed charitable purposes and company objects, within the agreed scope
• Memorandum and Articles of Association and core formation documentation
• Applicable Companies House identity-verification guidance
• Professional pre-submission review and Companies House submission
• Digital incorporation documents
• Normal 24–48 hour formation, subject to a complete application and Companies House processing



£349.00
+VAT

Charitable CLG Pro™

Recommended for

2
package

Buy Now Recommended Charitable CLG Professional™ — £349 + VAT. Including the Companies House fee · Professional formation with purpose, governance and future structure review.
Charitable CLG Professional™ is designed for organisations that understand their intended charitable purpose but want additional professional review before establishing the Company Limited by Guarantee. You receive everything included in Charitable CLG Essential™, together with a review of the proposed charitable purposes, company structure, members or guarantors, directors and governance approach before the formation is submitted to Companies House. Where the organisation also anticipates substantial commercial activity, the review can help you consider whether that activity may be appropriately undertaken within the CLG or whether a separate trading subsidiary could be considered as the organisation develops.

Professional Charitable CLG Review and Future Trading Structure Support
The Charitable CLG Professional™ package provides additional professional review before incorporation, helping ensure that the proposed charitable purposes, company structure, members or guarantors, directors and governance approach are considered before submission. The package is designed for organisations that want more than core incorporation assistance while keeping the scope of formation support clearly defined. Where substantial commercial activity is also part of the organisation's plans, the review can help identify whether that activity may appropriately remain within the CLG or whether a separate trading subsidiary could be considered as the organisation develops.
Included:
• Everything in Charitable CLG Essential™
• Review of the proposed charitable purposes before incorporation
• Review of the proposed company name and corporate structure
• Guidance concerning directors, members and guarantors
• Review of the proposed governance approach
• Consideration of the proposed commercial structure where substantial trading activity is anticipated
• Guidance on whether a future trading subsidiary may need to be considered, within the agreed scope
• Tailored formation documentation within the agreed scope
• Professional pre-submission review
• Companies House incorporation and filing
• £100 Companies House filing fee included
• Post-incorporation corporate support relating to the formation
• Digital incorporation documents
• Normal 24–48 hour formation, subject to a complete application and Companies House processing



£499.00
+VAT

CLG HMRC Ready™

Recommended for

3
package

Buy Now HMRC Ready Charitable CLG HMRC Ready™ — £499 + VAT. Including the Companies House fee · Prepare your charitable CLG for the HMRC recognition stage and future commercial structure.
Charitable CLG HMRC Ready™ is designed for organisations that intend to pursue HMRC recognition for charitable tax purposes after incorporation and want to prepare their CLG appropriately for that later stage. You receive everything included in Charitable CLG Professional™, together with an HMRC recognition readiness review and guidance on the information and supporting documentation likely to be required. Where the organisation also anticipates substantial commercial activity, the package can help you consider the relationship between the charitable CLG and a potential trading subsidiary, without making the subsidiary an automatic part of the formation package.

HMRC Recognition Readiness and Future Trading Structure Support
The package helps you prepare for the separate HMRC recognition stage by reviewing relevant charitable purposes, governing-document provisions and organisational information. Coddan identifies information and supporting documents likely to be required and provides a practical readiness framework for the next stage. Where the organisation also anticipates substantial commercial activity, the review can help you understand how a potential trading subsidiary could sit alongside the charitable CLG, while recognising that the subsidiary is a separate company and is not automatically required.
Included:
• Everything in Charitable CLG Professional™
• HMRC tax-recognition readiness review
• Review of charitable purposes and relevant governing-document provisions
• Review of organisational information likely to be required for HMRC recognition
• Identification of likely supporting information and documentation
• HMRC recognition readiness checklist
• Guidance concerning Gift Aid and relevant charitable tax reliefs and schemes
• Guidance concerning information to have available for the HMRC application stage
• Consideration of the proposed relationship between the charitable CLG and a potential trading subsidiary, where substantial commercial activity is anticipated
• Preparation support only — HMRC recognition is not guaranteed



£699.00
+VAT

HMRC Recognition™

Recommended for

4
package

Buy Now Premium Charitable CLG HMRC Recognition™ — £699 + VAT. Including the Companies House fee · Professional support through HMRC recognition and consideration of your future trading structure.
Charitable CLG HMRC Recognition™ is designed for organisations that are ready to pursue HMRC recognition for charitable tax purposes and want professional assistance with the application process. You receive everything included in Charitable CLG HMRC Ready™, together with assistance preparing the HMRC application, reviewing supporting information and coordinating routine HMRC correspondence within the agreed scope. Where the organisation is also planning substantial commercial activity, the package can help you consider the relationship between the charitable CLG and a potential trading subsidiary, while keeping the formation of that separate company outside this package unless separately agreed.

Professional HMRC Application, Recognition and Trading Structure Support
The package provides structured assistance through the HMRC recognition process, including preparation and review of the application information, identification of relevant supporting documentation and guidance concerning authorised officials and responsible persons. Coddan can also assist with routine HMRC clarification requests within the agreed scope. Where the organisation also plans substantial commercial activity, the package can help you consider how a potential trading subsidiary could operate alongside the charitable CLG, while the subsidiary remains a separate company and its formation is outside this package unless separately agreed. HMRC remains responsible for the recognition decision and applicable tax treatment.
Included:
• Everything in Charitable CLG HMRC Ready™
• Assistance preparing the HMRC recognition application
• Review of information supplied for the application
• Assistance identifying relevant supporting information and documentation
• Guidance concerning authorised officials and responsible persons
• Assistance with the HMRC application process
• Assistance with relevant HMRC correspondence within the agreed scope
• Coordination of responses to routine HMRC clarification requests
• Consideration of the proposed relationship between the charitable CLG and a potential trading subsidiary, where substantial commercial activity is anticipated
• Professional support through the recognition process
• HMRC recognition is not guaranteed




Charitable CLG + Commercial Activity

Commercial Activity Does Not Automatically Mean Another Company

If a charitable CLG has, or expects to have, commercial or trading activity, the first question is not whether to buy or form a trading subsidiary. The useful first questions are what the organisation will do, why it will do it, how the activity relates to its charitable purposes, what scale and risk are involved, and which company should undertake it.

A separate trading subsidiary may be appropriate now, later, or not at all. A charitable-purpose CLG can be formed first, but Companies House incorporation alone does not establish Charity Commission registration or settle HMRC recognition. If a trading company is needed, its formation, ownership and working arrangements are separate steps. The answer depends on the organisation's purposes, activities, contracts, people, assets, intellectual property, liabilities, funding, governance and longer-term plans.

Start with the activity. A charity may carry out some trading itself, including trading that directly furthers its purposes, subject to the applicable rules. In England and Wales, Charity Commission guidance says a trading subsidiary must be used for non-primary-purpose trading that exposes charitable assets to significant risk. The type of trade, tax position and jurisdiction also matter; a small or low-risk activity is not automatically free of obligations.

1. What Commercial or Trading Activity Is the Organisation Actually Undertaking?

The starting point is the activity, not the subsidiary. Describe what the organisation does now, what it plans to sell or provide, who will pay for it, and how the proceeds will support its purposes. You can speak to a person at Coddan if the plan does not fit a standard formation order.

What is happening now?

  • What goods or services are being supplied?
  • Who are the customers, users or beneficiaries?
  • Is the activity already operating, or is it planned?
  • What income is expected or already generated?

What is changing?

  • Is a new commercial service, product or venture being introduced?
  • Is existing activity growing in scale or risk?
  • Are contracts, employees, premises, assets or intellectual property being added?
  • Is a different commercial operating model emerging?

Examples include retail sales, a café or venue, training, consultancy, digital services, software or AI products, licensing, events, property activity and sponsorship. The same label can cover different arrangements: training delivered to beneficiaries as part of the charitable purpose differs from selling unrelated services to raise funds. Explain the actual customer, contract and purpose rather than relying on a label.

Existing activity is included.

Not every organisation arrives before the commercial activity begins. If a CLG is already trading, a subsidiary already exists, contracts have already been signed, employees work across arrangements, assets or intellectual property are already being used, or money is already moving between entities, the starting point is the current position rather than an artificial new-company beginning.

2. Why Does the Relationship Between the Activity and the Organisation Matter?

The relationship between the activity and the organisation's purposes can be structurally significant. You do not need to decide a legal or tax category before making an enquiry. The relationship between what is sold and the CLG's charitable purposes must be considered against its governing document and actual activities.

Purpose-led activity

An activity may directly further the organisation's charitable purposes or form part of the way those purposes are delivered. For example, an educational charity may charge for training that advances its educational purposes. Direct trading can be possible, subject to the governing document, charity rules and tax treatment.

Separate commercial activity

An activity may instead operate as a distinct commercial venture whose relationship with the charitable purposes is different. For example, sales unrelated to the charity's purposes may be carried on mainly to raise funds. The scale, risk and tax consequences of that non-primary-purpose trading can make a subsidiary necessary or appropriate.

Useful information includes the proposed objects and governing document, beneficiaries, customers, products or services, expected turnover, existing contracts and any previous charity or tax advice. This gives Coddan enough context to identify the formation work and where specialist charity-law or tax advice is needed.

Classification has consequences. Primary-purpose trading, non-primary-purpose trading, ancillary activity and small-scale exemptions are not interchangeable descriptions. If the correct treatment is uncertain, obtain appropriate advice before committing the charity to significant trading or assuming an exemption applies.

3. What Facts Affect the Structural Decision?

The following facts help establish whether the CLG can carry out the activity, whether a separate company would serve a real purpose, and what its relationship with the parent would need to cover. No single item decides the answer by itself.

Commercial scale

  • Expected or existing income and turnover
  • Growth plans and commercial commitments
  • Significant or recurring contracts
  • Customers, suppliers and counterparties

People and operations

  • Employees, workers and contractors
  • Premises and operational resources
  • Management arrangements
  • Operational dependencies between entities

Assets and value

  • Commercial assets
  • Intellectual property and licensing rights
  • Equipment, stock or other property
  • Proposed transfers or use by another entity

Exposure and risk

  • Liabilities and financial commitments
  • Contractual and operational risk
  • Funding, loans or guarantees
  • Potential losses and financial exposure

Longer-term plans matter as well. A structure that is proportionate today may need review if the commercial operation grows, takes on materially different risks, employs people, acquires valuable intellectual property or enters substantial contracts. State whether the activity is only proposed, already underway or being moved from another entity; the implementation work differs in each case.

4. Can the Activity Appropriately Remain Within the CLG?

Yes, potentially. The existence of commercial income does not, by itself, require another company. The professional question is whether keeping the activity within the charitable CLG is appropriate in the circumstances and compatible with the applicable requirements.

Factors that may support one-company operation

  • The activity is closely connected with the organisation's purposes.
  • The operating model fits naturally within the organisation's work.
  • The scale and risk are proportionate to the CLG's role and assets.
  • The governing framework and applicable requirements support the activity.

Factors requiring closer analysis

  • The activity is substantial or materially different from the charitable operation.
  • Commercial contracts, employees, assets or liabilities create greater exposure.
  • The organisation is entering a new commercial model.
  • Specialist charity, tax, accounting or other analysis is required.

“No subsidiary” does not mean “no trading rules”

Keeping activity within the CLG does not remove the need to consider charity-law, company-law, tax, VAT, accounting, governance and other applicable requirements. The CLG still needs suitable approvals, records and controls for its own activities. A later change in scale or risk can call for a fresh decision; a second company is not required merely because the CLG earns income.

One company can be the right answer. If the activity may properly remain within the CLG, there is no reason to form a subsidiary simply to complete a package. Coddan can explain the formation route, and any wider charity, tax or accounting assessment can be scoped separately.

5. When Does a Separate Trading Subsidiary Become Professionally Relevant?

A trading subsidiary is a separate non-charitable company controlled by one or more charities and used to carry on commercial activity. It is commonly used where a charity needs a distinct corporate vehicle for trading activity. In England and Wales it is required for non-primary-purpose trading involving significant risk to charitable assets; other circumstances require assessment on their facts.

What can make separation relevant?

  • Substantial or growing commercial activity.
  • Non-primary-purpose trading where the applicable rules and risk profile make separate treatment necessary or appropriate.
  • Significant contractual, operational or financial exposure.
  • Commercial employees, assets or intellectual property requiring a distinct operating vehicle.
  • A materially different commercial operating model.
  • A need to distinguish commercial management and obligations from the charitable organisation's activities.

These considerations are not a mechanical turnover test. A growing fundraising trade may raise tax and charity-law questions, while even a smaller venture can carry significant contractual or financial risk. Trustees should assess the proposed trade and the protection of charitable assets before choosing where it sits.

Corporate separation has a function.

A subsidiary is a real company, usually limited by shares, owned and controlled by the charity or charities. It can contract, employ people, hold assets and account for its own trading. It is more than a trading name, internal department or second bank account.

Separation is not absolute immunity

A subsidiary does not create a magic liability shield around the charitable CLG. The parent may still have exposure or responsibilities through investments, loans, guarantees, transfers, shared resources, contracts, governance decisions or support arrangements. Those connections must be considered rather than assuming that incorporation alone solves the risk.

6. One CLG or CLG + Trading Subsidiary — What Actually Changes?

There is no universal winner. The comparison is useful because it shows the professional consequences of the two models; it should not replace the determination itself.

Structural considerationTrading within the charitable CLGSeparate trading subsidiary
Corporate entitiesOne corporate entity — the charitable CLG.Two separate legal entities — the charitable CLG and the trading company.
Where activity sitsCommercial activity remains within the CLG.Relevant commercial activity is carried on by the subsidiary in its own corporate identity.
ContractsContracts are entered into by the CLG.Relevant contracts can be entered into by the subsidiary.
PeopleEmployees and management remain within the CLG's arrangements.The subsidiary can employ people and maintain its own commercial management structure.
Assets and liabilitiesRelevant commercial assets and liabilities remain within the CLG.The subsidiary can hold its own commercial assets and incur its own corporate liabilities, subject to the arrangements between the entities.
GovernanceOne corporate governance structure.Separate corporate governance and responsibilities, with a parent/subsidiary relationship where applicable.
Banking and accountingOne company's infrastructure and records.Separate company infrastructure, records and accounts, with appropriate intercompany arrangements.
RiskTrading exposure is borne within the CLG, subject to its obligations and protections.A separate vehicle can contain relevant commercial exposure, but parent investments, guarantees and other support may still create risk.
Ongoing administrationOne company's filings and records, alongside any charity obligations.Two companies' filings and records, with additional tax, accounting and intercompany considerations.
TimingActivity remains with the CLG if that is lawful and appropriate.The subsidiary can be formed at the outset or later, but the trading risk must be assessed before the activity begins or expands.

The correct model depends on the organisation's purposes, the activity, scale, contracts, people, assets, risk, funding and longer-term plans. The table shows what must be considered in each model. If you are unsure which column fits, describe the proposed activity and Coddan can identify the formation options and the limits of its service.

7. If a Subsidiary Is Appropriate, What Must the Parent/Subsidiary Relationship Achieve?

Incorporating a second company is only the formation step. The two-company arrangement then has to work as two connected but legally distinct organisations.

Parent and subsidiary are not one board

The charitable CLG may own or control the subsidiary and exercise appropriate shareholder or ownership rights. The subsidiary nevertheless remains a separate company with its own directors and corporate responsibilities. Directors must consider the interests and obligations of the company for which they are acting.

Matters that may require an appropriate arrangement

  • Ownership and control
  • Governance and decision-making
  • Directors and conflicts of interest
  • Funding, investment, loans and guarantees
  • Contracts and services between entities
  • Employees and premises
  • Intellectual property and other assets
  • Transfer of value and payment flows
  • Accounting, tax and records
  • Operational separation and oversight

Not every matter applies to every structure. The governing decisions and practical arrangements must match what the entities will actually do. Depending on the circumstances, this can involve clear ownership records, board decisions, agreements for shared staff or services, licences for intellectual property, funding terms and accounting records. The necessary work and its price should be agreed before it is undertaken; no document is automatically included merely because two companies are formed.

Conflicts and financial support

The same person may be a charity trustee and subsidiary director, but must recognise which company's decision is being made. Overlapping roles can create conflicts requiring identification and proper management, including any rules on remuneration or benefits. If the subsidiary performs poorly, the charitable parent should not automatically commit further charitable resources simply because it owns the company; the parent must consider the effect on its own charitable purposes, assets and responsibilities.

8. Forming the Trading Subsidiary

Form a separate company once its role and ownership are clear. If the trading activity creates significant risk to charitable assets, settle this before the activity is undertaken rather than incorporating a company after the risk has already arisen.

Decide the role, form the company, then put it to work

Confirm why a separate company is needed and who will own and direct it. Incorporate it with suitable details. Then allocate contracts, assets, people, funding and records to the correct entity before trading begins, where applicable.

A trading subsidiary is normally a separate company rather than a second charitable CLG. A company limited by shares is a common vehicle for commercial activity. Its share ownership, directors, name, registered office, articles and control information should reflect the agreed arrangement. A charity's CLG formation package does not itself include a second incorporation unless that is expressly agreed.

Companies House decides incorporation. Forming the subsidiary does not register the parent with the charity regulator, decide HMRC tax treatment, approve the trading arrangement or complete its operating arrangements. Coddan can explain its formation scope and refer specialist questions to the appropriate adviser.

Existing subsidiary? If a subsidiary already exists, the appropriate job may be review, correction, restructuring or formalisation rather than incorporating another company.

9. Putting the Two-Company Structure Into Appropriate Working Order

After incorporation, the professional job may include determining how the two entities should actually operate together. That work is separate from registering the company and is tailored to the organisation's actual arrangements.

Operational separation

Contracts, banking, records, accounting, employees, assets and other arrangements should reflect which legal entity is actually undertaking the relevant activity.

Parent oversight

The charitable CLG may exercise ownership or shareholder rights and oversee its investment, while the subsidiary's directors remain responsible for the subsidiary's own affairs.

Intercompany arrangements

Where the entities share resources, services, premises, intellectual property or funding, the appropriate commercial and governance arrangements should be considered.

Review and correction

If contracts, assets, people or money are already held or used by a different entity than intended, review the existing documents and transactions before proposing a transfer. The practical steps and any tax, employment or contractual consequences depend on the facts.

Where useful and agreed, Coddan can prepare corporate records and governance materials in digital or printed form. The right medium depends on who needs to use the records and how the two companies will operate. Printed constitutional documents, registers, first minutes or other physical materials are available only where suitable and included in the agreed scope and price.

10. When Another Specialist Route Is Required

A formation agent can help create the correct corporate vehicle, but the decision can involve specialist advice. Identify the questions that affect your plan early, particularly before committing a charity's money or moving existing contracts, employees or assets.

Tax, HMRC and VAT

The subsidiary is a separate taxable company. Tax treatment, Gift Aid, VAT registration and intercompany arrangements depend on applicable rules and circumstances. Specialist tax analysis should be used where required.

Charity law and regulators

Companies House incorporation does not determine whether an arrangement satisfies charity-law or regulatory requirements. The relevant jurisdiction and circumstances must be considered.

Accounting and finance

Separate entities can create separate accounting, reporting, funding and financial-management requirements, including consideration of the subsidiary's solvency and working capital before payments to the parent.

Employment, property, IP and contracts

Where people, premises, intellectual property or contracts cross the proposed boundary, the correct entity and implementation arrangements may require specialist work.

Tax and Gift Aid are not a universal profit-transfer mechanism. A wholly charity-owned trading subsidiary may, where the statutory conditions are met, make qualifying Gift Aid payments to its charitable parent. Such payments can reduce the subsidiary's taxable profits, but the subsidiary must consider its own financial position and obligations and the relevant rules. VAT treatment is separate again, and most charity VAT reliefs are not automatically available to a trading subsidiary.

Do not assume that every payment from a subsidiary to the CLG is a Gift Aid payment, or that forming a subsidiary determines its tax result.

11. What Is the Appropriate Next Structural Route?

Your next step depends on what the charity does and plans to do. Coddan can discuss the company formation options, explain its service scope and identify where specialist advice is needed. The possible outcomes include:

Continue the activity within the charitable CLG

The activity can appropriately remain within the CLG and no additional company is presently required.

Continue within the CLG with appropriate controls or further analysis

The activity may remain within the CLG, but particular governance, charity-law, tax, accounting or other controls or specialist work need to be addressed.

Form a trading subsidiary now

The facts and applicable requirements support a separate corporate vehicle, followed by appropriate parent/subsidiary implementation.

Prepare for a subsidiary later

The present activity may remain within the CLG, while the organisation plans for a possible separate company if scale, risk, contracts, assets or operating model changes.

Review or correct an existing arrangement

The organisation already has commercial activity or a subsidiary, and the appropriate route is review, correction, restructuring or formalisation rather than starting again.

Use another specialist route

Tax, charity-law, accounting, governance, employment, property, intellectual property, contractual, regulatory or restructuring work may need to be addressed before or alongside formation.

Further clarification is required

The available facts are insufficient to responsibly determine the structural route.

You may need only the CLG. A subsidiary carries separate filing, accounting and operating obligations. If the activity can properly stay with the charitable CLG, you can proceed on that basis and revisit the question if the facts change.

Frequently Asked Questions About Charitable CLGs and Trading Subsidiaries

These answers explain common points. The applicable result depends on the charity's jurisdiction, governing document, activity, risk and tax position.

Does earning income automatically mean my CLG needs a subsidiary?

No. Income or trading activity does not automatically require a separate company. The key questions are what is sold, whether it furthers the charitable purposes, the scale and risk, and the charity and tax rules that apply. For an England and Wales charity, a trading subsidiary must be used where non-primary-purpose trading involves significant risk to charitable assets.

Can a charitable CLG trade directly?

Potentially, yes. Some activities may appropriately remain within the CLG where the circumstances and applicable requirements support that approach. For example, a charity may charge for services that carry out its purposes. It must still consider its governing document, risk, accounting and tax treatment.

What is a trading subsidiary?

A trading subsidiary is a separate non-charitable company controlled by one or more charities and used to carry on commercial activity. It has its own legal identity, directors, records, accounts, contracts and corporate obligations.

Does a subsidiary protect the parent from every risk?

No. A separate company can provide structural separation, but it does not create absolute immunity. Investment, loans, guarantees, transfers, shared resources, contracts, governance decisions and support arrangements can still create exposure or responsibilities for the parent.

Can an existing trading activity be moved into a subsidiary?

Potentially, but the appropriate route depends on what already exists. Contracts, employees, assets, intellectual property, funding and liabilities may need to be reviewed before any transfer or restructuring is undertaken.

Can an existing subsidiary arrangement be reviewed?

Yes. Yes. An existing parent and subsidiary can review their governance, contracts, assets, people, funding and operating arrangements. Corrective work may need specialist advice and consent from third parties; forming another company is not necessarily the answer.

Who owns the subsidiary?

One or more charities normally own and control a trading subsidiary. The shareholding and voting arrangements should be settled when the company is formed. The charitable CLG can exercise its ownership rights, but the subsidiary has its own directors and corporate responsibilities.

Does forming a subsidiary decide the tax position?

No. A trading subsidiary is generally a separate taxable company, and its tax position depends on the activities, profits, payments and applicable rules. Formation does not itself determine Corporation Tax, Gift Aid or VAT treatment.

Can the trading subsidiary make payments to the charitable parent?

Potentially. A wholly charity-owned trading subsidiary may, where the relevant conditions are satisfied, make qualifying Gift Aid payments to its charitable parent. The subsidiary must also consider its own liabilities, working capital and solvency.

Is a payment from the subsidiary to the parent automatically tax-free?

No. The character and treatment of a payment matter. Not every payment is a qualifying Gift Aid donation, and the applicable tax and charity-law conditions must be considered.

What is the nine-month rule for Gift Aid?

For a company wholly owned by one or more charities, qualifying Gift Aid payments may in certain circumstances be made within nine months after the end of the accounting period and still receive relief against the earlier period's Corporation Tax profits. The statutory conditions must be checked for the particular payment.

Does the trading subsidiary have its own VAT obligations?

Potentially, yes. A trading subsidiary is not itself a charity, and most VAT reliefs available to charities do not automatically apply to it. VAT treatment depends on the supplies and the circumstances, including registration and any applicable arrangements such as VAT grouping.

Can the subsidiary employ people?

Yes. A separate trading company can employ its own staff and maintain a separate commercial management structure. Where people work across both organisations, the actual employment and operational arrangements should be reviewed.

Can the trading subsidiary own assets?

Yes. A subsidiary can hold its own commercial assets and incur its own corporate liabilities. Where assets or intellectual property are shared or transferred between the entities, the appropriate arrangements should be considered.

Does the subsidiary need its own directors?

Yes. The subsidiary is a separate company and has its own directors and corporate responsibilities. Some individuals may hold roles in both organisations, but their duties remain separate and potential conflicts should be identified and managed.

Can I establish the trading subsidiary later?

Yes. The charitable CLG can be established first and the subsidiary considered later if commercial activity grows or the structure changes. If significant-risk non-primary-purpose trading is expected from the outset, the subsidiary question must be resolved before that trading is undertaken. Consider the intended contracting party, employees, assets, intellectual property and funding before commitments are made.

Can Coddan help establish both companies?

Coddan can provide formation and related corporate support for the charitable CLG and, where appropriate, a separately agreed trading company. Tell us whether both are needed now or whether the subsidiary is a later possibility. We can explain the work and price within our scope; charity-law, tax and other specialist advice may need a qualified adviser.

Which route should I take if I am unsure?

Send a short description of the charitable purposes, the proposed trade, expected income, contracts and risks, and whether either company already exists. You can start with the CLG formation options or speak to Coddan about a non-standard case. The answer may be one company, two companies, a later review, correction of an existing arrangement or specialist advice.

There is no universal two-company answer. The appropriate structure depends on the organisation's purposes, activities, scale, commercial risk, governance arrangements, funding model and longer-term plans.

Build Your Charitable CLG and Trading Structure

You can begin with the CLG if its present activity supports that approach, then add a subsidiary when the circumstances call for one. Where significant-risk non-primary-purpose trading is planned, resolve the subsidiary requirement before it begins. A simple first conversation can establish which formation work is needed now and what requires separate specialist advice.

Tell us what you plan to do, who will trade, and whether any contracts, people or assets are already committed. We can explain the available formation options and any separately priced work.

Discuss Your Formation Plan
Charitable CLG & Trading Structure

A More Straightforward Way to Plan the Relationship Between Charity and Commercial Activity

When a charitable organisation expects commercial income, the first choice is where the activity can properly take place. Tell Coddan what the charitable Company Limited by Guarantee (CLG) will do, what it plans to sell and whether a separate company is already involved. We can help you identify the relevant corporate formation steps, discuss a non-standard case with you and explain the scope and cost of any further work. You do not have to select a two-company package simply because the activity earns income.

Start With the Activity, Not the Subsidiary

The existence of commercial activity does not automatically mean that a second company is required. Describe the nature and scale of the activity, contracts, people, assets, intellectual property and possible losses. A charity's direct delivery of its purposes can differ from an unrelated venture used to raise funds. This information helps identify whether CLG formation alone is the immediate step, or whether subsidiary formation and specialist advice need to be considered before trading.

Separate the Two Corporate Roles Clearly

Where a separate trading subsidiary is appropriate, the charitable CLG and the commercial company have different corporate roles and obligations. The subsidiary contracts and trades in its own name, with its own directors, filings and accounts. The charitable parent must also consider its investment, ownership, oversight and any shared staff, property or services. Coddan can help with corporate formation and agreed related materials; tax, charity-law and other specialist arrangements should be handled by the appropriate adviser.

Build the Structure Around the Organisation's Actual Stage

A trading subsidiary does not have to be incorporated on Day 1. The CLG can be formed first if that fits the current plan. A separate company can be formed later before the relevant trading begins or expands, provided the charity has assessed the legal and risk position. If significant-risk non-primary-purpose trading is already planned, address the subsidiary requirement now. This avoids both premature incorporation and a late scramble to move contracts or assets.

Keep the Professional Boundaries Visible

Coddan can explain its CLG and subsidiary formation services, the information needed to order and the scope and price of any additional corporate support. Companies House decides incorporation; the relevant charity regulator and HMRC decide matters within their remit. Charity registration, tax treatment, VAT, employment, asset transfers and intercompany funding can require separate specialist work. Ask us before ordering if your situation is unusual.

A straightforward route begins with a clear description of the charitable purpose and commercial activity. Coddan can then explain whether the immediate formation request is for the CLG alone or also for a separately agreed trading company. You can speak to a person about an unusual order, see the scope and price before extra work is undertaken, and ask about suitable digital or printed corporate materials. Each company still has its own legal, tax and filing obligations.