What is a Community Interest Company (CIC)? Business structure explained

Thinking about starting a business with a social purpose? If so, you might have come across the term Community Interest Company (CIC), but what is a CIC and how do they operate?

A CIC is a unique type of limited company that is set up to provide community benefits or achieve a social purpose.

Whether you’re an aspiring social entrepreneur or simply exploring ethical business models, understanding what a CIC is, and how it operates, can help you decide if it’s the right fit for you.

Let’s take a look…

What is a Community Interest Company?

A Community Interest Company (CIC) is a type of business that is formed with the aim of helping the community rather than making money for owners and shareholders.

A CIC still operates like a regular business but  must reinvest the majority of its profits into supporting its chosen social cause.

Just like any other business, a CIC is registered with Companies House and HMRC and usually no shares are issued.

A CIC can still make money and pay salaries however any dividends are capped at 35% of retained profit (more on that later!)

Is a CIC a charity?

While both CICs and charities must adhere to tight regulations, they are not the same thing.

Like charities, CICs are designed to achieve a social purpose but they differ in business structure, regulations and how they operate.

For example, while a CIC is a type of limited company, a charity can take various legal forms and is registered with the Charity Commission rather than Companies House.

Charities must also be entirely non-profit and operate via donations, grants and fundraising. A CIC meanwhile can and should raise a profit (that is then reinvested back into the CIC) and can raise money via investments and traditional trading.

How to set up a CIC: step-by-step guide

Starting a Community Interest Company (CIC) is a great way to run a business with a social mission.

Step 1: Choose the Right Legal Structure for Your CIC

Before you register your CIC, you need to decide on its legal structure. CICs can be set up in two main ways:

Company Limited by Guarantee – No shareholders, just guarantors who agree to support the business financially if needed.

Company Limited by Shares – Owned by shareholders who can receive dividends (capped at 35% of profits).

Step 2: Draft Your CICs Community Interest Statement

Every CIC must submit a Community Interest Statement (Form CIC36). This document explains:

• What your CIC does
• Who your CIC will benefit
• What you will do with profits

The CIC Regulator will review your submission to ensure your company genuinely serves a community purpose.

Step 3: Prepare your essential documents for CIC registration

To officially register your CIC, you’ll need the following paperwork:

• Form IN01 – the standard company registration form for Companies House.
• Form CIC36 – your community interest statement
• Memorandum and Articles of Association – the governing rules for your company including an asset lock, details on profit redistribution and a registered office address.

Once you have these documents ready you can submit them online or by post to Companies House.

Running and regulating a CIC

Once you’ve set up a Community Interest Company (CIC), it’s important to understand how to run it properly.

CICs have specific rules to follow, including reporting requirements and how profit is managed.

These regulations help ensure that the business stays focused on its social mission while allowing room for business growth.

While a CIC aims to support the community, they can make a profit in order to achieve their social objectives.

CICs are required to use the majority of their profits to fund their social activities, however they can distribute a certain amount of shares to their directors as dividends.

The asset lock

The asset lock is in place to ensure a CIC uses its assets, such as land, property and income, to support their social cause and benefit the community, rather than for private gain.

The asset lock states that:

• A CIC can only transfer assets at full market value, unless the transfer is to another CIC, charity or for community benefit. This includes selling goods, property, shares or making payments to staff and service providers.
• If the CIC pays dividends to shareholders, they cannot exceed 35% of the company’s profits for the year.
• If the CIC closes down, any remaining assets (after paying debts) must be given to another CIC, charity or asset-locked organization.

Reporting requirements for a CIC

Like all limited companies, Community Interest Companies must report their activities and finances each year.

Key reports include:

• Community Interest Report – this is an annual report that details how the business has impacted its chosen cause, how profits have been used and how dividends have been paid (if applicable).
• Annual accounts confirmation statement to Companies House.
• Company tax return to HMRC
• VAT and PAYE reports to HMRC if applicable.

Why choose a CIC structure?

If you want to run a business with a strong social purpose, a Community Interest Company (CIC) could be the perfect option.

CICs combine the flexibility of a business with the mission-driven focus of a charity, allowing you to trade, generate income and reinvest profits into a cause you care about.

Like any business model, a CIC structure comes with benefits and potential drawbacks:

Is a CIC right for your social enterprise?

Choosing to set up a Community Interest Company (CIC) is a great way to combine running a business with having a lasting social impact.

With the flexibility to trade like a regular company while staying legally committed to benefiting the community, CICs can be the best of both worlds.

Although it’s worth remembering that CICs face limitations on tax benefits, strict regulations on profit distribution and require annual reporting to prove their social impact.

That said, in 2025 consumers, investors, and communities are actively looking for and supporting businesses that create real change.

More people want to buy from, invest in and work for companies that prioritize social good, making now the perfect time to learn how to set up a CIC and get started.