Throughout the past few months, in the news, on Twitter, Facebook – there has been a lot of talk about Social Enterprises.

But firstly, what is a social enterprise? How does it compare to a Regular/Standard Business? What are the common legal structures of both? And what are the advantages and limitations of both? Look no further, here we have analysed and answered all of these questions for you.

Social Enterprise Regular Business
Definition According to ‘www.businesslink.gov.uk’ the official definition is the following: “a social enterprise is a business with primarily social objectives whose surpluses are principally reinvested for that purpose in the business or in the community, rather than being driven by the need to maximise profit for shareholders and owners.” In more simple terms, a social enterprise is a business that exists in order to address a social or an environmental need. Once making a profit, the money is then invested back into the community or back into the business. A regular business tends to have a primary objective of making profits, not being concerned on how it is earned – so long as it legal and ethical. These businesses usually set out to earn the profits purely to benefit themselves and worry less about the social impacts of their business.
  Social Enterprise Regular Business
Common legal structures
  • private company limited by shares
  • company limited by  guarantee
  • limited liability partnership
  • community interest company
  • community benefit society
  • cooperative society
  • registered charity

 

  • sole trader
  • simple partnership
  • limited partnership
  • limited liability partnership
  •  private company limited by shares
  •  company limited by guarantee

 

  Social Enterprise Regular Business
Advantages More likely to get investment form government grants.+  More likely to obtain volunteers i.e. people working for no/low costs.+  Providing opportunities for local people to gain employment.+  Makes a positive social impact on people and communities.

+  Gives the flexibility and freedom of being able to trade commercially whilst still fulfilling social aims

 

+  Owners usually gets to keep more of the profits (without having to justify their own pay)+  Classed as being more traditional.+  Tends to be more information out there about these well-known legal structures.+  Your business can still make a positive social impact on people and communities.
  Social Enterprise Regular Business
Limitations  May be hard to find volunteers, and instead may have to find paid employees – reducing profits. Have to compete in the commercial market and face the same challenges and risks common to all businesses Profits for employees, directors etc tend to be less than regular businesses. –  May be more difficult to get a government supported grant.  May be harder to get volunteers to support your business.

Will you go for a Social Enterprise or a Regular Business ? Ask yourself these questions…

Is your sole purpose and main objective for setting this business address and help social or environmental need? A Social Enterprise may be the most convenient for you.

Is your main objective to make a profit? You seem to fit in with the more traditional business structure.

 

[information_box title=”Related Topic In The News” ]Last April the prime minister talked about a scheme called the ‘Big Society Capital’. In essence this consists of the government’s approach to improve the economy. The brilliant news is, that within this ‘Big Society’ scheme, the government has set aside £600m for social enterprises and charities! In the video attached below – courtesy of ‘The Gaurdian’; David Cameron set out to prove that people can indeed repay the loans through the income they generate.[/information_box]