The term Social Enterprise or even Social Business is a fashionable one, but a little confusing, as it refers to a wide range of legal forms that organisations can take. Organisations describing themselves as Social Enterprises can be community groups, charities, companies of various forms, co-operatives, mutuals, or straight for-profit businesses and sole traders. When it comes to social enterprise, it pays to be clear what you do and don’t mean!
For Support Staffordshire, the main factors that show you are a genuine social enterprise are:
- Your charitable purpose or good cause should be clear to us
- You should either be 100% not-for-profit or you should reinvest a majority (at least 50%) of any profits into your good causes
- You must have an asset-lock clause that protects the assets (cash and property) of your organisation in the event of your organisation winding up
- You must have an appropriate governing body (usually a minimum of 3 independent people) that ensures you involve your community or beneficiaries
Social Enterprises that can meet these criteria are welcomed and encouraged to join us as members. If you are starting up, you might favour being a sole trader to start with, in which case we will consider you for our Startup Membership.
Usually the main reasons for becoming a social enterprise are around selling your services or goods in order to generate an income stream for your charitable or good causes. Where organisations generate more income from this approach than they do from traditional donations or ‘giving’, they tend to call themselves social enterprises, as opposed to charities. In truth you can be both and generate money from both sources.
Occasionally social enterprises raise money in other, even more innovative ways, such as through issuing shares or seeking ‘social investment’ (which means loaning money to get started). Some of these forms of social enterprise may preclude you from also being a charity, so it’s best to discuss your ideas with us early on.