Legal information on Social Entrepreneurship... in UK

Social enterprises use a wide variety of legal forms, the possible options available are as follows:

Limited company

A limited company is a separate legal entity from its members and gives them limited liability. A limited company set up with a social purpose needs to set out its objectives which can also include commercial objectives. There are two choices of limited companies for social enterprise entities, a company limited by shares and a company limited by guarantee. In the case of a company limited by shares, dividends can be paid to the shareholders.
Limited company accounts need to be filed at Companies House and consideration needs to be given as to whether an audit is required.
If the limited company's objectives are exclusively charitable and for the public benefit it may also be set up as a charity. Where this is the case the company will need to consider whether it needs to register with the Charity Commission. If it is a charity then it will need to follow Charities Act 2011 and the Charity Commission will require the submission of Annual Returns. In return, however it will have the benefits of being a charity such as potentially qualifying for a number of tax exemptions and reliefs on income and gains, and on profits for some activities.


Trusts are unincorporated bodies which do not distribute profits. The trust is set up as a legal entity which governs how its assets are to be used and as such can hold property and other assets for the community. Trustees act on behalf of the community in looking after the assets but it is important to note that the trust does not have its own legal identity The trustees are therefore liable for the trust's liabilities.
Trust deeds are set up to protect the trust's objectives. The trust is able to write an asset lock into its rules in order to secure assets for its intended community.
Like limited companies trusts can also be charities. The same points which are noted above for charitable limited companies should be considered for charitable trusts.
Charitable Trust: Charities Act 2011:
Trustee Act 1925
Financial Services and Markets Act 2000:
Trustee Act 2000:
Pensions Act 2004:

Unincorporated association

Where two or more persons are bound together for one or more common purposes by mutual undertakings, each having mutual duties and obligations, in an organization which has rules identifying in whom control of the organization and its funds are vested, and which can be joined or left at will."[1] The essential elements there exist members of the association; that there is a contract binding them inter se; and that there must have been a moment in time when a number of persons came together to form the association.
Conservative and Unionist Central Office v Burrell [1981] EWCA Civ 2 is an English trusts law case, concerning the policy of the "beneficiary principle" and unincorporated associations:

Charitable incorporated organisation (CIO)

A charitable incorporated organisation (CIO) is a new form of legal entity designed for non-profit organisations in the United Kingdom. The main intended benefits of the new entity are that it has legal personality, the ability to conduct business in its own name, and limited liability so that its members and trustees will not have to contribute in the event of financial loss. These are already available to limited companies; charities can be formed as companies, but then they must be registered with both Companies House ( ) and the Charity Commission ( ) In contrast, the CIO only needs to register with the Charity Commission. This is expected to reduce bureaucracy for the charity.

Community interest company (CIC)

A CIC is a legal form created specifically for social enterprises. It has a social objective that is "regulated", ensuring that the organisation cannot deviate from its social mission and that its assets are protected from being sold privately. For more information on CICs, contact the CIC regulator -

Industrial and provident society (IPS)

This is the usual form for co-operatives and community benefit societies, and is democratically controlled by its members in order to ensure their involvement in the decisions of the business.

Companies limited by guarantee or shares

The most common legal structure for standard businesses. Many social enterprises also choose these legal forms because they are very flexible when it comes to governance, and when it comes to getting investment. To ensure a standard company is a true social enterprise it will need to ensure it has a social mission written into its Memorandum and Articles of Association and is clear about reinvesting its profits.

Group structures with charitable status

This is a very common legal form for social enterprises. In part, it is common as increasing numbers of charities are moving away from traditional models of fundraising and becoming more business like in order to ensure their sustainability. Partly it is a result of the fact that tax is an important consideration for some organisations where the retention of surpluses is essential. In these cases the tax breaks associated with charitable status can be an important factor and mean that having a charitable structure as part of the group is worthwhile.