Business Articles
Social Enterprise Businesses - Forms - Types
A social enterprise business is one that is set up for reasons other than just the purely financial profit motive. If you decide that a social enterprise business is something that you would most like to set up, then there are various legal forms of social enterprise businesses that you could investigate. These include unincorporated associations, trusts and limited companies.
It can be a good idea to consider whether not to set up as a social enterprise business at all, but as a straightforward charity. This can offer advantages such as large tax benefits. However, straightforward charities also bring with them more regulation and a massive decrease in your own business flexibility. The major difference between a social enterprise business and a charity is not so much a specific legal set up as what your organisation does with the profits that it receives. You may need to consult a professional before making your final decision as to whether to be a charity or a social enterprise business, but for now this article will outline some of the differences between the various forms of social enterprise businesses you can opt to create.
Unincorporated associations usually cost next to nothing to set up and are very simple to run. They consist of a number of individuals joining together for whatever is the aim of their social enterprise business, and deciding to run it as they see fit, with much more freedom than a traditional company (they do not even have to submit an annual returns form) and no requirement to be registered with or regulated by either Companies House or the Financial Services Authority. One of the downsides of an unincorporated association however, is that it has no legal identity of its own, and any risks (such as financial ones) are carried by the individual or individuals themselves.
Trusts are a legal device in which assets given by an individual or an organisation are dedicated with strict control over how the said assets can be used- this is usually referred to as a trust deed, created to protect the central aims of the trust. Many organisations in such fields as healthcare, education and conservation are set up as trusts; they do not have to be incorporated but unlike unincorporated associations they can have ownership of property. As with unincorporated associations, however, they too do not have a separate legal identity.
Limited companies with a social purpose can be set up in two forms, as either a Private Company limited by shares (CLS) or a Private Company limited by guarantee (GLS). The idea is to provide those in charge of the company with less liability than those running an unincorporated company or a trust. The CLS gives shareholders a limited liability solely on the amount unpaid on their held shares, while the GLS sees each member guarantee to give a certain amount of money to the company in the event that is wound up.
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