What is a Social Enterprise?

Perhaps you’ve not heard of a social enterprise before, but there are 70,000 of them operating in the UK, and there’s no reason your business can’t be the next one, provided you’re looking to offer something more meaningful to society than just a product to sell. Here’s our handy run-down to precisely what a social enterprise is.

What is a social enterprise?

In the words of Social Enterprise UK, social enterprises are businesses that are set up to change the world. In a general sense, they are not so different from other businesses in that their ultimate goal is still to make a profit. The main difference comes from what they do with it. Social enterprises reinvest their profits into their communities or to good causes. They also draw their workforce from sectors of society that traditional companies are less likely to consider, with 59% of social enterprises hiring individuals who are otherwise at a disadvantage in the labour market, according to Social Enterprise UK. Perhaps the most well-known example of a social enterprise is The Big Issue which enables homeless individuals to earn their own income.

Their pay rates are also kept fair and transparent, the CEO won’t take home a salary that is grossly disproportionate to their staff and their leaders also enjoy greater diversity, with 40% of the UK’s current social enterprises being led by individuals with disabilities.

In short, social enterprises are businesses which strip away the traditional values of corporate businesses and work instead for the good of their wider community rather than simply the growth of their profit margins.

How to form a social enterprise*

You can set up a social enterprise under almost any business profile, including a registered limited business or a sole trader. You can also set up as a registered charity, but a Community Interest Company or CIC is a business profile specifically designed for social enterprise, which may be a better option.  

CICs are monitored by the Office of the Regulator of Community Interest Companies to ensure they are upholding the values of community-centric businesses, they also guard against the company being privately sold and help maintain the charitable integrity of any venture.

CICs are still limited companies and must still be registered with Companies House. To complete registration, companies must submit the following:

  • A ‘community interest statement’ which explains the vision of the business and how it will fulfil its role as a business that betters society, consider this a social enterprise business plan

  • Evidence of a created ‘asset lock’, this is a legal promise that company’s assets will be dedicated to its social goals, with set limits on the money that might be paid to shareholders.

  • Applications will automatically be sent to a CIC regulator for approval - unless this is given, your registration cannot be completed.

*As always, this article is intended for educational purposes. When setting up any type of company, you should seek the advice of a tax or legal professional to meet your specific needs.

What are the benefits of running a social enterprise?

Aside from knowing you are making a meaningful difference in your community, the benefits of social enterprises include being a more attractive prospect when it comes to funding, donations and even individual workers. Their transparent, unconventional and flexible nature makes them an appealing place to work or a great cause to be involved in for many people. Unlike charities, social enterprises can still raise their own profit, allowing them to have direct control of the cash flow running through the business. So if you want to truly make a difference, attract like-minded people and do it in a sustainable way that depends on your own business acumen and social entrepreneurship rather than unpredictable donations, a social enterprise may be the way forward.

Social enterprise funding

There are several well-known organisations that social entrepreneurs can approach for funding of their companies. These include the Arts Council England, Funding Central and Charity Bank as well as many others. You should also look into what tax relief you are eligible for, as this can be a key way to ensure your profits are all directed towards your vision and not being drained by utilities.