There are many different arrangements for how a childcare provider can choose to operate. These include operating as part of a school; as a registered company with Companies House; as a registered charity with the Charities Commission; or as a sole trader/partnership registered with Her Majesty’s Revenue & Customs (HMRC). It is important that you choose the right legal status.
Providers are required to communicate any business changes with Ofsted. A registered provider who, without reasonable excuse, fails to comply with these requirements commits an offence.
It is recommended that in the beginning you complete a business plan that sets out the aims and objectives of the business and should also include forecasted budgets and cash flow projections.
What business structure will work best for your childcare provision?
When setting up a new business it is also important to think about the structure of your organisation, your business's legal status and to understand the legal responsibilities involved in operating a business.
There are a number of different business legal structures that can be explored when thinking about how you wish to operate your after school club. The main types to consider are:
1. Sole Trader
As a sole trader, you run your own business as an individual and you can keep all your business' profits after you've paid tax on them. As a sole trader you can employ staff. A disadvantage to this is that you are personally responsible for any losses your business makes.
2. Limited company
A limited company is an organisation that you can set up to run your business – it is responsible in its own right for everything it does and its finances are separate to your personal finances. Any profit it makes is owned by the company. The company can then share its profits.
Every limited company has members who are the people or organisations who owns the shares in the company. In addition, Directors are responsible for running the company. In some cases Directors have their own shares, but they don't have to. Directors of a limited company must comply with requirements of Companies House such as submitting annual accounts, holding meetings and maintaining the company's public records. Private limited companies cannot have charitable status.
3. Registered charity
The club is run by a management committee, formed by a group of volunteers. This may be the best option if you are short of funds, as it enables the committee to apply for grants from charitable trusts and foundations. All members of the management committee have to be DBS checked (if your club is Ofsted-registered) and you must also register with the Charity Commission.
4. Social enterprise
Social enterprises are businesses trading for social and environmental purposes. Social enterprises are distinctive because their social purpose is absolutely central to what they do: their profits are reinvested to sustain and further their mission for positive change. Social enterprises can use a variety of legal structures including:
For more information on social enterprises, visit the website for the Social Enterprise Coalition.
Once you have decided what business structure you are going to work under, it is important that you register your business.
The Government has produced guidance about setting up a new business.
The following changes need to be communicated to Ofsted, as set out in the Early Years Foundation Stage (EYFS) statutory guidance paragraphs 3.77 and 3.78:
Where providers are required to notify Ofsted about a change of person except for managers, as specified above, providers must give Ofsted the new person's name, any former names or aliases, date of birth, and home address.
If there is a change of manager, providers must notify Ofsted that a new manager has been appointed. Where it is reasonably practicable to do so, notification must be made in advance. In other cases, notification must be made as soon as is reasonably practicable, but always within 14 days. A registered provider who, without reasonable excuse, fails to comply with these requirements commits an offence.