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.
Compare the structures
The right legal structure depends on your goals, funding needs, and the level of regulation you're comfortable with.
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:
- A CIC limited by shares can issue shares, with dividends capped at 35%.
- A community benefit society can issue withdrawable community shares.
- A co-operative society can issue shares to its members.
- A company limited by guarantee or a 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?
A company limited by guarantee (Companies House only) and a co-operative (FCA registration) carry the lightest regulation. A CIC (Companies House and the CIC Regulator) and a community benefit society (FCA) sit in the middle. A CIO carries the most, because the Charity Commission sets the strictest governance requirements.
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Define your primary purpose
Clearly articulate the social/community benefit you aim to achieve. This determines which structures fit.
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Assess if charitable status applies
If your purposes are exclusively charitable, consider CIO or charitable CLG for tax advantages.
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Decide on asset lock requirement
If assets must be protected for community use, CIC or BenCom provide automatic protection.
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Consider funding needs
If raising share capital from investors or the public, CIC (shares) or BenCom (community shares) allow this.
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Evaluate governance preferences
Co-ops and BenComs have democratic 'one member one vote' structures. CICs and CLGs have more flexible governance.
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Seek professional advice
A social enterprise lawyer or specialist accountant can help match structure to your specific circumstances.
Legal basis
Primary legislation and key regulations
Browse UK legislation (opens in a new tab) legislation.gov.uk