How to start a social enterprise – and why

If your business idea has a strong social or environmental mission at its heart, it might well make a great social enterprise!

As we become more socially and politically conscious, many consumers are keen to vote with their wallet. Providing a product or service that’s ethical and helps your community is a great way to stand out from the crowd while earning some serious good karma.

Why start a social enterprise?

Social enterprises combine business smarts with making a difference in the community. Unlike charities, they turn a profit; unlike companies, doing good is at the core.

A social enterprise solves a problem and delivers social dividends. No matter what form it takes, it provides a measurable benefit for the community: for example, employing people who are overlooked by other businesses.

How to form a social enterprise

Social enterprise is actually something of an umbrella term; the British government offers several business structures for budding social entrepreneurs.

Community interest companies (CICs)

For many people, CICs are almost synonymous with social enterprise. They are essentially a special subset of limited company. While they are registered with Companies House in the same way, they pledge their assets to the community and there is a limit on how much they can pay shareholders. They have a well-defined purpose and are regulated by a dedicated government office.

Co-operatives

Setting up as a co-operative is another popular option. Co-ops are run by and for their members, usually local to a specific area. They work particularly well for shops – the structure works well for suppliers, workers and shoppers alike. For example, you could set up a restaurant that buys its produce from local growers and shares the profits.

Charities and charitable incorporated organisations (CIOs)

If your main objective is simply to help and not to make money, consider registering as a charity. In order to qualify, you must meet one of the government’s charitable purposes as outlined in the 2011 Charity Act.

Limited companies, sole traders and partnerships

These are the most familiar business structures, and do not have the same obligations as those listed above. If delivering a benefit is difficult to measure or you’re simply more interested in the business side of things, there’s nothing wrong with registering as a limited company or sole trader and helping the community on your own terms.

Unincorporated associations

Unincorporated associations are ideal for non-profit groups like sports clubs. You needn’t register or report to the government unless you start turning a profit, in which case you’ll need to pay corporation tax and file a company tax return in the same way as a limited company.

What else do I need to know about social enterprises?

Running a social enterprise comes with heavy expectations of transparency and accountability, so it’s important to keep your social mission at the forefront of everything you do.

Social Enterprise UK says that social enterprises should, among other guidelines, have a clear mission, reinvest the majority of their profits and make most of their money through trade.

Examples of social enterprises

The Big Issue is by far one of the biggest social enterprises in the UK, as well as one of the oldest. Founded in 1991, it offers a legitimate income to homeless people and helps them to reintegrate into society.

FareShare works with producers and retailers to reclaim food that would otherwise go to waste and redistributes it to charities around the country, especially food banks.

The Soap Co. trains and employs blind, disabled and otherwise disadvantaged people to make sustainable luxury body care products. They currently employ over 100 people and aim to create 60 new jobs every year.

The Golden Company trains young Londoners in beekeeping and enterprise, helping them to develop and sell their own products at Borough Market.

bio-bean collects used coffee grounds from businesses and processes them into biomass for fuel. Costa Coffee alone sends roughly 3,000 tonnes of grounds per year.

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