How to set up social enterprises in the UK

If you're interested in starting a business that will help others or improve the environment, then setting up a social enterprise could be the first step.

In the last decade, social enterprise has boomed, with a significant increase in the number social enterprise start-ups. 

According to recent government figures, there are more than 70,000 social enterprises in the UK, employing over two million people and contributing over £24 billion to the UK economy.

Well-known examples of thriving social enterprises include: The Big Issue, Divine Chocolate, the Eden Project, Cafedirect and Jamie Oliver's restaurant Fifteen.

What is a social enterprise?

A social enterprise is a company whose core mission is to benefit and improve society. 

Like any business, they aim to make a profit but this is always reinvested back into their social or environmental goals.

Social enterprises can be found in almost every industry, ranging from very small local projects to multi-million-pound service companies, and each may have a different legal structures.

Despite this diversity of business focus, social enterprises share a similar set of characteristics:

• a clear social or environmental purpose
• generate an income predominately from trading
• reinvest the majority of their profits in their social mission

Can I get finance for my social enterprise?

Many social enterprises are started on shoestring budgets, reliant on donations of money equipment and time from friends, family, and local business supporters. 

But as with any business, a cash injection is always welcome whether it's to fund your start-up or help your social enterprise grow.

There are many sources of money for social enterprises from investment schemes to grants. 

Schemes include Start Up Loans, Untld, the Seed Enterprise Investment Scheme and Enterprise Investment Scheme.

Grants are also available from many sources including Investment and Contract Readiness Fund (ICRF), UKTI and Nesta.

Other sources of funding include regional schemes and angel investors, with ClearlySo Angels, the first UK angel investor network for social ventures, launched in 2012 to provide investment and mentoring to social enterprises.

HMRC tax relief schemes can also help you attract funding for your social enterprise by offering a range of tax relief to individual investors investing in new shares.

How to I set up a social enterprise?

When setting up a social enterprise there's no one legal business structure to curtail you. 

You can choose the form that best suits your business and its social purpose including:

• Sole trader or business partnership, which must be registered with HMRC
• Limited company, which must be registered at Companies House
• Charity or a charitable incorporated organization
• Co-operative, which is owned and run by members for their own benefit

You can also set up a community interest company (CIC) - a limited company that operates to provide a benefit to the community they serve rather than private shareholders.

CICs must have a clear social mission and are regulated to ensure they maintain this purpose. 

To set up a CIC, you need to apply to Companies House with a 'community interest statement' that explains your business plan and create an asset lock to protect company's assets. 

You'll also need approval from the CIC regulator. 

Once established, a CIC must submit detailed accounts, an annual return and a CIC report each year.

For further information on CICs, visit the Office of the Regulator of Community Interest Companies page on Gov.uk.