Social enterprises and community structures UK-wide

Social enterprise structures

Compare legal structures for trading with social purpose - CICs, charities, co-operatives, and community benefit societies.

Guide summary

Choose a legal structure for your social enterprise based on your purpose, funding needs, and how much regulation you can manage. The most popular option is a Community Interest Company (CIC) – it costs £115 to form online, has a 35% dividend cap, and an asset lock to protect assets for the community. Only charities (like CIOs) get tax advantages like Gift Aid and Corporation Tax exemptions.

  • Define your social purpose first – it decides which structures fit
  • Choose a CIC if you want to attract investment – formation costs £115
  • Use a BenCom or co-op for democratic 'one member one vote' control
  • Asset lock is mandatory for CICs and BenComs – optional for CLGs
  • Only charities (CIOs) get tax relief – CICs and co-ops pay normal tax
  • Max individual investment in BenComs and co-ops is £100,000 per person
  • Dividends capped at 35% of profit for CICs – no dividends for charities
  • Get professional advice from a social enterprise lawyer or accountant
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Related guides in Business Finance

Social enterprises are businesses that trade to tackle social problems, improve communities, or protect the environment. Unlike traditional businesses, profits are primarily reinvested for social purpose rather than distributed to shareholders.

Choosing the right structure

The right legal structure depends on your goals, funding needs, and the level of regulation you're comfortable with.

Detailed structure comparison

Community Interest Company (CIC)
Asset lock, 35% dividend cap, CIC Regulator oversight. Online formation £115. No special tax treatment. Best for trading social enterprises wanting to attract investment.
Company Limited by Guarantee (CLG)
No share capital, surplus reinvested, members' liability typically £1. Can add asset lock in articles. Popular for non-profits, social enterprises, charities.
Charitable Incorporated Organisation (CIO)
Registered with Charity Commission, tax advantages (Gift Aid), but strictly charitable purposes only. Cannot pay dividends.
Community Benefit Society (BenCom)
FCA registered, mandatory asset lock, one member one vote, can issue community shares. Best for community ownership models.
Co-operative Society
FCA registered, owned by members, democratic control. No automatic asset lock (unlike BenCom). Various models (worker, consumer, etc.).

Key decision factors

Do you need an asset lock?

An asset lock prevents assets being distributed to members except for community purposes. Required for CICs and BenComs. Optional for CLGs (can add to articles). Not automatic for co-ops.

Do you want to raise share capital?

Only some structures allow share issuance:

  • CIC Limited by Shares: Can issue shares, 35% dividend cap
  • Community Benefit Society: Can issue withdrawable community shares
  • Co-operative Society: Can issue shares to members
  • CLG/CIO: Cannot issue shares

Do you want tax advantages?

Only charities (including CIOs) have significant tax advantages:

  • Generally exempt from Corporation Tax
  • Gift Aid on donations (25% extra)
  • Potential business rates relief

CICs, BenComs, and co-ops pay tax like ordinary businesses.

What level of regulation are you comfortable with?

Lower regulation: CLG (Companies House only), Co-operative (FCA registration)

Medium regulation: CIC (Companies House + CIC Regulator), BenCom (FCA)

Higher regulation: CIO (Charity Commission - strictest governance requirements)

  1. 1

    Define your primary purpose

    Clearly articulate the social/community benefit you aim to achieve. This determines which structures fit.

  2. 2

    Assess if charitable status applies

    If your purposes are exclusively charitable, consider CIO or charitable CLG for tax advantages.

  3. 3

    Decide on asset lock requirement

    If assets must be protected for community use, CIC or BenCom provide automatic protection.

  4. 4

    Consider funding needs

    If raising share capital from investors or the public, CIC (shares) or BenCom (community shares) allow this.

  5. 5

    Evaluate governance preferences

    Co-ops and BenComs have democratic 'one member one vote' structures. CICs and CLGs have more flexible governance.

  6. 6

    Seek professional advice

    A social enterprise lawyer or specialist accountant can help match structure to your specific circumstances.