Frequently Asked Questions
What is social enterprise?
A social enterprise is a business with social objectives at the core of the structure. A social enterprise does not distribute profit in a traditional manner. Rather it ploughs back any surplus into the business to grow, fulfil the social objectives or enhance the development of its workforce.
When am I trading?
You are trading when you sell goods or services expecting a profit and you do this more than once.
What are social objectives?
These are the community or environmentally orientated aims that an organisation is committed to fulfil and the reason to set up a social enterprise.
The nature of the enterprise does not need to reflect the nature of the social objective(s). You may wish to go into business in order to enable people with learning difficulties to develop working or social skills.
Both the business model and the social objectives must be embedded in the organisation's structure and governing documents.
What is the difference between an ethical business and a social enterprise?
A social enterprise has social objectives at the core of its legal structure and business model. A business may have an exceptional Corporate Social Responsibility policy in place but if it does not have social objectives at the core it is not a social enterprise.
What is the difference between a charity and a social enterprise?
For a social enterprise, creating income through trading and looking to create a surplus is essential. A charity will normally secure funding to deliver activity and is not necessarily looking to create a surplus when delivering services.
What is a legal form and a legal structure?
A legal form is a type of organisation as defined by law. Different regulations apply to different legal forms. There are unincorporated and incorporate legal forms.
Unincorporated legal forms do not distinguish between the organisation and the individuals who are part of it and therefore these are fully responsible for the organisation's performance, financial or otherwise. An incorporated legal form provides the organisation with a separate legal entity to its members. This limits their financial liability.
A legal structure defines the objectives of the organisation and the powers of its members. A legal structure will provide answers to questions such as Why are you doing this? (General objectives) What are you doing? (Specific objectives) and How are you doing it? (Distribution of Powers and responsibilities amongst members and governing body)
Can I raise equity if I am a social enterprise?
Community Interest Companies can raise equity by selling shares. There is a cap as to how much dividend can be paid on a share and this is 5% above the Bank of England base lending rate. The rate may vary by the Regulator with the approval of the Secretary of State.