Social enterprises come in many shapes and sizes; from community-owned village shops to large development trusts, and in many legal forms, including community interest companies, industrial and provident societies and companies limited by guarantee, among others.
The legal structure you decide is right for you depends on the social purpose of your enterprise and how you think it should be run.
Choosing the right legal structure can be daunting and each model has implications which can have far-reaching consequences for the future of your enterprise. Our top tip is to start by contacting your local social enterprise network who will have good links with local legal specialists that can sit down with you and help you decide which structure is right for your enterprise.
As a quick start, the following is a general overview of some of the most common structures:
Unincorporated associations. This covers those informal groups that come together for a common purpose, but have no legal identity. They have a very basic organisational structure and individual members are liable for the activities of the organisation, including contracts or loans.
- Trusts. These are managed by trustees who act on behalf of communities for whose benefit the trust has been set up. Trusts have a trust deed, which outlines their social objectives and provides details of where the trust's assets can be used. Trusts are legally allowed to own property, so can often complement those informal groups set up as unincorporated associations
- Companies limited by guarantee or shares. The most common legal structure for businesses and often considered to be the most flexible. Formed as a company with a social purpose they will have an 'object' clause that details their social or environmental objectives. Members' liability is governed by shares (as in a company limited by shares) or by a guarantee (company limited by guarantee). For further information on starting a Limited Company, visit the Companies House website
- Community interest companies (CICs). A CIC is a limited company created for the benefit of the community, rather than shareholders or owners. It has a social objective that is "regulated", ensuring that the organisation cannot deviate from its social mission and that its assets are protected. For more information on CICs, contact the CIC regulator
- Registered charities are organisations with goals that are exclusively charitable and exist for the public benefit. This legal structure can be appealing for many social enterprises because of the tax relief available. However, registered charities sometimes face greater regulation than limited companies and may be less flexible. For further information on registering a charity, visit the Charity Commission website
- Industrial and provident societies (IPS). These are a common legal form for community benefit societies and co-operatives. They are democratically controlled and collectively owned by their members for the benefit of the community or cause that they serve. For further information on starting a co-operative, visit the Co-operatives UK website.
For further information on the different legal structures, the following external links may be of use:
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