Social enterprises

If you want to set up a business that has social, charitable or community-based objectives, you can set up as an:

• unincorporated association

• incorporate organisation, such as a:

  • limited company

  • charity, or a charitable incorporated organisation (CIO)

  • co-operative

  • community interest company (CIC)

  • sole trader 

  • business partnership

Unincorporated associations are groups that come together for a particular purpose, such as a sports club.

Usually, they would have a constitution that sets out the rules governing their relationship and a broad membership that elects the management committee. Unincorporated associations do not have a separate legal entity and so members of the management committee can carry personal liability.

This is a very popular vehicle for social enterprises when the entrepreneur establishing the organisation wishes to remain in control and receive a salary from it. 

CICs can be established either as a company limited by guarantee or shares. 

However, there are some particular features associated with these types of companies in order to safeguard the social mission:

• a CIC has to carry out activities that fulfil a 'community purpose'

• a CIC also has a lock on its assets, which prevents profits from being distributed to its members or shareholders other than in certain limited circumstances. However, the board of directors will still be paid.

Note that these cannot be charities. CICs are regulated by the CIC Regulator. 

You can register your CIC with Companies House online.

A CIC is required to file a community interest report each year, which will include details of how it has pursued the community interest and involved stakeholders.

A co-operative (co-op) is a member-owned business. The members may be local residents. Co-operatives UK is an organisation that supports UK co-operatives and it provides online tools that help organisations.

This legal structure gives wider membership an equal stake in the organisation and an equal say in the management and other affairs, for example, by co-operatives and credit unions.

For more information, read the government’s guidance on social enterprises and Ask a lawyer if you would like to set up a social enterprise or need further assistance with your social enterprise.