Legal Structures for Social Enterprises

Legally, there is no such thing as a ‘social enterprise’ – that’s the umbrella term that covers a wide range of organisations – in addition to Community Interest Companies, these also include standard companies limited by guarantee (with and without charitable status), Scottish Charitable Incorporated Organisations and those labelled as an Industrial and Provident Society (IPS). There are two types, a Community Benefit Society and a Co-operative Society.

  • Company Limited by Guarantee* (CLG)
  • Trust*
  • SCIO (Scottish Charitable Incorporated Organisations)
  • Community Interest Company (CIC)
  • Co-operative Society
  • Community Benefit Society* (BenCom)

*These can be with or without charitable status

Deciding on where the money is coming from will indicate which particular legal structure is appropriate for your business, as well as what you are going to do with any profit, whether you want to take advantage of tax breaks and how much control you want to retain over your social business.

The ability to trade without restrictions is very different whether you go along the charitable or non-charitable route. The ability to distribute profits through dividends is also different, depending on your legal structure.

If you are relying on grant funding, the charitable organisation structures will often open a lot more doors. However, if your income is primarily going to come from trading and you have an underlying social purpose, that would probably indicate a community interest company (CIC) as a more appropriate option as this would enable you to act like any other company more or less, paying directors expenses and a remuneration.

Each structure brings its own benefits, restrictions and reporting requirements which will determine which is most appropriate for your business. Click here to find out more about each option and which is more appropriate for your organisation.

To read more on CIC’s and IPS read “What legal form should your social enterprise be?” a blog by Myles Cooper’s, a non-practicing solicitor and specialist advisor at Inspire2Enterprise: (Senscot )