1. Nursery Management Understanding and Managing Finance
Types of Organisation
Nursery Management Understanding and Managing Finance

2. Some Types of Organisation
Sole Trader
Partnership
Limited Company (Ltd)
Public Limited Company (PLC)
Voluntary organisations
Central and local government
Quasi-governmental bodies

3. “Sole Trader”
Owned and controlled by one person (though more may work in it) for example a registered childminder or a private nursery owned by an individual
Advantages: Simple, flexible, full control and full retention of profits
Disadvantages: Unlimited liability, Difficult to raise capital, limits growth
Indicative Requirements: Licence
VAT registration
Accounts (for tax reasons)
Health and Safety regulations
Employment regulations

4. Advantages and disadvantages of being a sole trader
Full control and full retention of profits
Disadvantages:
Unlimited liability, it may be difficult to raise capital

5. “Partnership”
Similar to Sole Trader but owned/ controlled by more than one person, for example a privately owned nursery run and owned by two friends
Governed by formal or informal partnership agreement (“Deed of partnership”) or subject to Partnership Act 1890
Shared responsibilities
Shared finance and profits
“Jointly and severally liable”
Liability of “sleeping partners” can be limited

6. Limited Company (Ltd)
Subject to stricter regulatory framework, than sole trader and partnership
Example a large nursery chain like Busy Bees
Owned by shareholders, run by Directors
Separate legal entity to those who own it or run it
Limited liability (may be limited by guarantee)
Pays Corporation Tax on profits
Profits distributed to shareholders through dividends
Registered with Companies House
Governed by Articles/Memorandum of Association

7. Limited Company (Ltd) Advantages: Protection of limited liability
Continuity through separate identity
Easier to raise finance
Credibility
£100 to start up
Disadvantages: Legal formalities and costs
Lack of privacy of accounts
Accountability to shareholders

8. Public Limited Company (PLC)
Similar to Limited Company but shares traded publicly through Stock Exchange
Must adhere to specific legislation (e.g. 6 monthly accounts, qualified accountant as Company Secretary)
Method of raising finance (e.g. through sale of shares)
Original owners can realise some of the value of their shares

9. Statutory Requirements for Incorporated Companies
Annual report including:
Annual return
Profit and Loss Account, Balance Sheet and
Cash-flow Statement
Notes to Accounts
Directors report
Auditors’ report (if appropriate)
Information required is dependent on size of the Company (small, medium, or large)

10. Voluntary Organisation - Unincorporated
Collection of individuals with common aim
Example a small crèche run by a local church group
May have a membership structure and constitution
No separate legal status - cannot incur debts or be sued
Individuals may therefore be jointly liable (but may take out liability insurance)
A trust may be suitable for organisations with charitable aims
A trust is normally governed by a trust deed - trustees manage the assets for the benefit of a specific purpose

11. Voluntary Organisation - Incorporated
Company limited by guarantee or Industrial and provident society
Example a Charitable nursery
Can hold property, enter into contracts and employ staff in own name
Limits personal liability (to the guarantee) assuming no breaches of trust
Has to comply with law and legislation and will incur additional costs

12. Charitable Status
A group MAY register as a charity if its aims and objectives are “charitable” according to the Charity Commissioners’ definition - i.e. they fall into one of the 4 “heads of charity”:
- relief of the poor, the handicapped and the aged
- the advancement of religion
- the advancement of education
- other purposes beneficial to the community
Trustees may not benefit from the organisation and beneficiaries cannot be those who give (i.e. self-help groups are not charitable

13. Charitable Status Disadvantages
Political and campaigning activities are limited
Trading activities are limited
Must comply with charity law - submitting annual accounts; stating charitable status of official documents
Monitored by Charity Commission
Application process (though now simplified including model governing documents
Advantages
Financial - including exemption from most forms of direct taxation
Status/credibility of charity registration number

14. Central and local government Quasi-governmental bodies
An example of early years provision here, in England, could be Children Centres