Believe it or not, there is no legal definition for what constitutes a social enterprise. A social enterprise is defined by its activities, not by its legal structure. So certification for social enterprises are limited in scope. The most popular way to get recognised as a social enterprise is by getting B-Corp certification, although this route may be too costly for some.
So where should you start? Defining your business structure can be a minefield, so it’s important to ensure you get all the facts.
Here we cover some of the main points to think about when you’re setting up and registering as a social enterprise across various countries.
With about 70,000 social enterprises in the UK, setting up a social enterprise needs to be thought about carefully in terms of its legal structure. A social enterprise can be set up as a limited company (which must be registered at Companies House),a sole trader business (registered with HMRC), business partnership, charity or charitable incorporated organisation (CIO), mutual (eg industrial and provident society and co-operatives – owned by members and run for their benefit) or community interest company (CIC).
Legal structures predominantly used in the US for social enterprises are L3C’s, Benefit Corporations and Cooperatives. But that’s not all of the types you could use. Read EnvisionSpark’s story on how they came to decide on their legal structure for their social enterprise.
The Social Enterprise Alliance is the largest information source in America for the social enterprise sector, having been a key catalyst for change since 1998. Check out their Knowledge Center for best practice.
In Australia, there are again many ways you can structure your social enterprise business. There are no formal certification processes to register yourself as a social enterprise, but Social Traders have set up their own Certification, which you can apply for via their website.
Social Traders are Australia’s leading social enterprise development organisation, who have supported over 3,500 social enterprises nationally and are a good source of information on legislation.
Europe and Worldwide:
France is one of the only countries worldwide to actually have a social enterprise law (the ESS law), whereby business must meet certain criteria in order for them to be considered as a social enterprise. Greece has its own legal form, called a Social Cooperative Enterprise. Worldwide, there are many organisations to help you get started, like UnLtd India.
We’d always recommend seeking legal advice when registering your business and do as much online research as possible. The social enterprise field is changing all the time, and depending on where you are based and where your business operates, you’ll be sure to find the legal structure that’s right for you and your organisation.