There are several possible models when it comes to setting up your business as an individual, partnership or a social enterprise.
You may wish to run your business simply as a sole trader (certainly most likely when you are starting up), or in a partnership, as a corporation or limited liability company (LLC).
If you are a sole trader, you run your own business as an individual and are self-employed. You can keep all your profits your enterprise makes, after you’ve paid tax on them. You are also personally responsible for any losses your business makes.
The HM Government website explains everything you need to know to set up as a sole trader here
Partnerships are businesses owned by two or more people. A contract called a deed of partnership is normally drawn up. This states the type of partnership it is, how much capital each party has contributed, and how profits and losses will be shared.
Contract (deed of partnership) is normally drawn up, stating type of partnership, how much capital each party has contributed and how profits and losses are shared. A partnership can also have a sleeping partner who invests in the business but does not have dealings in the day to day running of the enterprise. Read more detail on how to set up a business partnership on HM Government website here
Social Enterprise Business Models
However, if your work has a social mission either by giving back to the community, the environment or encouraging positive social change then you might want to consider setting up a charitable body of some sort. Read more on what activity constitutes a social enterprise here
It is worth taking the time to establish which model is most appropriate to meet your needs and aspirations.
Here are 6 different models you might want to consider:
To be a valid charitable trust, an organisation must demonstrate both a charitable purpose and a public benefit. Organisations with charitable status cannot use assets for any purpose other than the pursuit of charitable objectives. The assets of a charity can never be used for private benefit.
Charitable Trusts are widely recognised as existing for social good. This can assist with fundraising and suppliers, banks, funders and lenders are familiar with the concept of charity.
Charity Limited by Guarantee
A charity limited by guarantee is a legal structure for organisations seeking full charity registration AND limited liability. Like Charitable Trusts suppliers, banks, funders and lenders familiar with charitable CLG’s. It does have burden of dual registration with, regulation by, and reporting to, both The Charity Commission and Companies House.
Charitable Incorporated Organisation
A Charitable Incorporated Organisation is a legal structure available for charities or charitable groups that wish to be incorporated with limited liability. This is suitable for small to medium sized organisations which employ staff and/or enter into contracts and is simpler than establishing a charitable company. It also enables it to conduct business in its own name, rather than the name of the trustees.
Conversely a Cooperative is an autonomous association of people who voluntarily cooperate for their mutual social, economic, and cultural benefit. If you want to limit ownership to just a few people, even as the business grows, then a co-operative may not be for you.
Purbeck Youth and Community Foundation is a Community Interest Cooperative in Wareham using arts as a medium for its youth work delivery.
Community Interest Company (CIC)
A Community Interest Company (CIC) is a type of company designed for social enterprises that want to use their profits and assets for the public good; they work for the benefit of the community.
The Asset Lock is a fundamental feature of Community Interest Companies (CICs). The Asset Lock is designed to ensure that the assets of the CIC (including any profits or other surpluses generated by its activities) are used for the benefit of the community.
Community Benefit Societies
Community Benefit Societies (BenComs) are incorporated industrial and provident societies (IPS) that conduct business for the benefit of their community. The society must exist for the purposes of carrying on an industry, business or trade. It must reflect a commitment to the wider community, with profits being ploughed back into the business, rather than being distributed to members.
For more information on all the social enterprises business models take a look at a valuable resource Know How Non-Profit website here
If you would like advice on what model is best for your social enterprise then contact Rosie Russell, Culture+ Social Impact Lead here
Illustration by Bridie Cheeseman