Social Enterprises and Not-for-Profit Entities
Dedicated to driving social change and community benefits. Focused on achieving their mission while ensuring financial sustainability and compliance with regulations.
Social Enterprise (For-Profit) | Social Enterprise (Not-For-Profit) | |
1. Set-Up and Business Structures | Can be set up as a company limited by shares, a community interest company (CIC) limited by shares, sole traders and partnerships. | Can be set up as a company limited by guarantee, a CIC limited by guarantee, a CIO, a co-operative, an unincorporated association, or a charitable trust. |
2. Shareholders / Members | Shareholders (if a company limited by shares or CIC with shares) have ownership and voting rights based on shareholding. | Members or trustees who have voting rights but no ownership of assets or profits. |
3. Income Streams | Trading income, grants, donations, sponsorship, investments. | Mainly grants, donations, fundraising, trading (if within charitable objectives), sponsorship. |
4. Purpose-Driven | Aim to address social, environmental, or community challenges through business activities. | Aim to address social, environmental, or community challenges through business activities. |
5. Distribution of Profits | Profits can be distributed to shareholders (dividends) or reinvested into the business. If a sole trader or partnership, profits are those of the proprietor(s). | Profits must be reinvested into the organisation’s objectives or held for future sustainability. |
6. Taxation | Will fall subject to usual profit-making taxation rules and be subject to corporation tax and income taxes, VAT, and payroll taxes. | May be exempt from Corporation Tax if registered as a charity. Otherwise, usual VAT and payroll taxes will apply. Charities may qualify for specific VAT reliefs. |
7. Governance and Legislation | Governed by company law (Companies Act 2006), with additional regulations for CICs (Community Interest Company Regulations). | Governed by charity law (Charities Act 2011), the Companies Act (if a CLG), and regulated by the Charity Commission. |
8. Key Differences | Allows profit distribution to shareholders. Primarily focuses on achieving social objectives while being profitable. | Prohibits profit distribution to members/trustees. Entire focus is on achieving social or charitable objectives. |
9. Key Benefits | Provides flexibility in profit use, can attract investors, and can operate like a standard business. | Access to charitable grants and tax reliefs, increased public trust due to charity status, and protected assets. |
