For several national governing bodies of sport, commercial activities and sponsorship will be a major income source and will in some cases the activities of the organisation would not be possible without. Organisations ability to trade will in some cases be decided by the chosen organisational structure (limited company, charity or unincorporated association).

Organisations structured as a charity will, for example, compared to limited companies enjoy considerable advantages when it comes to VAT; where certain sales and purchases are zero rated or exempt from VAT and when it comes to direct taxes with some exemptions exist on tax of profits and incomes from the sales of goods. These advantages, however, comes with a cost as charities are more or less free to trade in pursuit of their charitable objectives but restricted in engaging in commercial oriented trades which involves significant risks. If a charity, therefore, wish to engage in commercial activities and income generation they will in many cases have to be placed in a trading subsidiary and even in cases where trading is not restricted but involves significant risks it might be useful to place the commercial activities in trading subsidies to protect the parent charity. Setting up a trading subsidy might, however, involve extra management resources and other cost making it less favourable. 

Unincorporated associations will be free to trade as a company but have restriction in relation to managing risk and ownership of assets as such organisation have no separate legal identity. For an unincorporated association to take on loans or take up ownership of commercial assets all members of the association will have to sign up and all members of the association will, therefore, also be liable in case of bankruptcy etc.

Limited companies are best designed for income generation and commercial activities as the organisation will have a separate legal identity and members will, therefore, only be liable with the guaranteed capital and it will be able to trade on equal terms as other limited companies. Organisations structured as a limited organisation will in many cases, however, still wish to separate the commercial activity with from the organisation itself, as it ensure that in case of bankruptcy or other claim bade against the commercial trading company, it will only affect the commercial part of the organisation and the rest will be safe to continue its activities.         
 

Downloads:

Ethical Sponsorship Policy.docx

Template for Ethical Sponsorship Policy.

Fundraising Grants and Sponsorship.pdf

Guidance on raising commercial income from Running Sport.

Maximising income generation.pdf

Booklet focusing on non-profit organisations and trading/commercial income.