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Social Enterprises in the United Kingdom
Episode 16821st May 2023 • I Hate Numbers: Business Improvement and Performance • I Hate Numbers
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Are you ready to explore the incredible world of Social Enterprises in the United Kingdom? Join us on a thrilling journey as we uncover their astonishing growth, with £60 billion contributed to the economy and over 2 million people employed. Get ready to dive deep into their fascinating business models, including Community Interest Companies, cooperatives, and private companies limited by shares.

Discover the secrets to choosing the perfect structure for your social enterprise. Buckle up for an engaging episode of the "I Hate Numbers" podcast, where we unlock the power of social enterprises in making a difference and driving both profit and social impact.

Today, we're diving into the fascinating world of social enterprises in the United Kingdom.  Welcome to another captivating episode of the "I Hate Numbers" podcast. Brace yourself for a deep dive into the incredible growth, unique business models, and legal structures that are revolutionising the way businesses make an impact!

Episode Highlights

The Rise of Social Enterprises in the UK: Can you believe it? Social enterprises have been taking the UK by storm! We're talking about 100,000 social enterprises, contributing a whopping £60 billion to the economy and providing employment to around 2 million people. Those numbers are nothing short of astounding!

Defining Social Enterprises

 So, what exactly is a social enterprise? Well, it's not your typical charity, folks. Social enterprises are businesses that tackle social and environmental issues while also making a sustainable profit. It's all about blending the best of both worlds—doing good while running a successful venture.

Choosing the Right Business Model

 Now, when it comes to social enterprises, picking the right business model is crucial. But don't worry, it's not rocket science! You just need to consider a few factors. Think about your objectives, how you plan to raise funds, and whether you're looking for personal rewards. Oh, and tax benefits can come into play too! So, a bit of strategic thinking and planning goes a long way.

Community Interest Company (CIC)

The CIC Model: Ah, the beloved CIC! It's short for Community Interest Company. Let me tell you, this model is gaining serious popularity among UK social enterprises. Why? Well, CICs are designed to ensure that the profits they generate are primarily used for social good. They have a specific community purpose, and they even require a community benefit statement. 


Embracing Democratic Control: Hold on to your hats, folks! We're about to talk cooperatives. No, not the grocery store chain, but the type of structure that embraces democratic control. In cooperatives, members—whether they're employees, customers, or members of the local community—have a say in decision-making. Plus, they all share the profits. It's all about transparency, fairness, and the well-being of the members.

Industrial and Providence Societies (IPS)

IPSes as Community Benefit Societies: Now, let's chat about IPSes, also known as cooperative or community benefit societies. These legal structures are tailor-made for social enterprises, regulated by the Financial Conduct Authority. IPSes prioritize the well-being of members and the wider community. They open doors to various tax benefits and funding opportunities, making them a valuable choice.

Conventional Private Company Limited by Shares

Raising External Capital: Hey, don't forget, folks—social enterprises can also be conventional private companies limited by shares. Yep, it's true! By opting for this structure, they can raise external capital from investors. And guess what? They can access funding programs like SEIS and EIS too. It's all about finding the right fit for your vision and mission.

Charitable Incorporated Organization (CIO)

Combining Charitable Purpose and Legal Structure: Last but not least, let's talk about CIOs—a legal structure primarily for organizations with charitable purposes. By registering as both a charity and a CIO, these incredible entities offer limited liability protection to their members while enjoying tax benefits associated with charitable status. It's a win-win!


Well, folks, that's a wrap on our exploration of social enterprises in the United Kingdom. They're a force to be reckoned with, combining business acumen with social impact. Whether you're a CIC enthusiast, a cooperative champion, an IPS advocate, a shares company trailblazer, or a CIO superhero, social enterprises are changing the game in the UK economy and society.

We hope you found this episode both enlightening and entertaining. We're eager to hear your thoughts and experiences with social enterprises. Are you involved in one? What's your preferred model? Don't forget to join us next week for another exciting episode of the "I Hate Numbers" podcast. Until then, take care and catch you on the other side!

If you want to see how we can help you with your social enterprise, accounts, tax affairs, budgeting or planning then contact us for an initial FREE chat.

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In recent years, social enterprise has gained significant traction in the United Kingdom as a powerful business model, combining profit-making with social impact. According to Social Enterprise UK, there are 100,000 social enterprises in the United Kingdom - listen to this, folks - contributing 60 billion pounds into the economy and employing around about 2 million people.


That's some numbers. In this week's I Hate Numbers podcast, I'm going to be looking at social enterprises in the United Kingdom and looking at the different business models and structures that can be adopted. I'm also going to comment on what a social enterprise is, and it's more than just doing good stuff, and emphasise the fact that a social enterprise is a business.


You are listening to the I Hate Numbers Podcast with Mahmood Reza. The I Hate Numbers podcast mission is to help your business survive and thrive by you better understanding and connecting with your numbers. Number love and care is what it's about. Tune in every week. Now, here's your host, Mahmood Reza.


Now, social enterprises are organisations that strive to achieve social and environmental issues while generating sustainable revenue. They run themselves as a profit-making venture. Not quite the same as a charity would be doing. What the profits are actually used for is where the differences are for a private company where you've got owners who enjoy all the profits themselves and a social enterprise.


Now, understanding the various business models and structures employed by United Kingdom Social Enterprises is critical for anyone who's looking to take on a social enterprise, develop their social enterprise, or perhaps end up working with or for a social enterprise. Now, it's important to note at this stage here that the actual final structure that you adopt for your social enterprise has got to be driven by a number of variables.


Substance follows forms i.e. what is the outcome? What are the objectives? How are you looking to raise funding? Are you looking to actually enjoy any personal reward in that venture? Are you looking to access funds from things like fund trust and donations? If so, the model that you choose will be an influencer.


Tax benefits may also be a factor. So, for example, if you decide to run as a charity organisation, that will give you an ability to generate gift aid from any donations that are made. If that is not really your income stream here, then a charity organisation and structure may not be the most appropriate.


So, you've got to really think carefully. Do a business plan. Think about the objectives. Think about the route map that you're going to be taking in your social enterprise, and decide the structure that best fits that purpose. It always is possible to modify and change structures as you go along, but if you start off where you mean to begin from, then that's always going to be much better.


Now, one popular model for a social enterprise in the United Kingdom is what's called a CIC. That's the abbreviation which stands for a community interest company. Now, this is, in my opinion, a very popular business model, and it's certainly increasing in popularity amongst UK’s social enterprises. CIC are designed to ensure that any profits generated, the primary purpose of those profits are to be used for social good, for the community, and for the issues that this social enterprise has been structured and set up for.


They operate with a specific community purpose, and opening up a CIC means you need to generate what's called a community benefit statement. More of that in a future podcast. At the end of each financial year, they're typically treated like companies. You've got to submit returns to the registrar, find your accounts accordingly,


and within a CIC structure, you've got two variants. You can be a CIC that's limited by guarantee or you can be a CIC that's limited by shareholding. The flexibility of the shareholding structure enables you to attract external investments and also to distribute some of those profits by way of dividends.


Certainly not the whole lot because you have something called an asset lock. Again, more of that in a future episode. So, CICs are certainly one popular model and one of the other reasons they're very popular is because they also act as an intermediary step to becoming a charity at some point in the future.


It's not unusual for charities, for example, to be running their organisations and have a CIC sitting by the side of it that might actually undertake some of the more entrepreneurial risk-taking activities. Now, the second potential business model you can have is what's called a co-op or co-operative, and we're not talking about the store, we're talking about the type of structure.


Now, co-operatives are another prevalent business model within the UK social-enterprise sector, and these organisations are owned and democratically controlled by the members. So, if transparency and openness and democracy is your thing, then a co-operative may be a suitable model for you. These members can be employees, they can be customers, or even members of the local community.


Co-operatives operate on the principles of collective decision making, shared profits, and a focus on the well-being of their members. Fair trade practices as practiced by the Co-operative Retailing Organisation demonstrates their social and environmental responsibility. Now, you can have also what's called an IPS, which is the abbreviation of an industrial and provident society.


The IPSes are often referred to as co-operative or community-benefits societies, and those are specific legal structures specifically designed for social enterprises. They're actually regulated by the financial conduct authority and not by Companies House, and the members' well-being is priority for them as well as the wider community.


Democratic control is an emphasis as well as shared benefits. Now, this structure, this IPS structure, helps social enterprises access various tax benefits and funding opportunities that may not be available to other types of social enterprise model. So, as we said at the beginning, or I said at the beginning, think carefully what your objectives are, your business plan, your funding streams, where that money's likely to come from,


because that will have an influence over the structure that you adopt. Now, it is possible for a social enterprise to be a conventional private company limited by shares. Now, social enterprise has a specific meaning. It's not just about being fair and ethical. It is either statemented or within your core-mission statement that you're going to do some social good.


Generally speaking, a lot of social enterprises will be run by people who would be classified as entrepreneurs in a private-sector environment, except their activities are driven to doing social good, social benefit. And we find that across the board in the world of education, retailing, hospitality, helping vulnerable people, a whole sway of society and its community, that social enterprises are there


to serve. Now, the advantage of a company limited by shares is that you can raise external capital from investors, and in fact, actually most of the social enterprise models here, with one or two exceptions, enable you to access funding from things like SCIS funding or EIS funding as well. Now, the last model I want to comment on here is what's called a CIO, all these abbreviations - hey folks, which is called a charitable incorporated organisation.


Now, this is a legal structure. Predominantly for an organisation has a charitable purpose, so it'll be registered as a charity and as a CIO, if you're registered as a CIO, you only have to do one set of documentation, and returns to the Charity Commission are not to Companies House. Now, CIOs provide limited-liability protection to their members while allowing them to access tax benefits associated with charitable status.


Typically, things like gift aid on donations, things like favorable rates relief. The structure of CIO is particularly beneficial for enterprises heavily focused on delivering public benefits and engaging in charitable activities. Now, what can we say in summary, folks? Understanding the different business models and legal structures by social enterprises in the UK is really an important thing to understand, not only from working for, working from, but as also in an advisory situation as well.


So, whether it's through the community-driven structure of the CIC, the co-operative focus membership basis, or a CIO, social enterprises are a growing force in the British economy and in British society. Folks, I hope you found this podcast useful. I'd love to hear your thoughts on this. Are you involved in a social enterprise?


If so, what's your preferred model? Until we meet again next week, I'll see you on the other side. We hope you enjoyed this episode and appreciate you taking the time to listen to the show. We hope you got some value. If you did, then we'd love it if you shared the episode. We look forward to you joining us next week for another I Hate Numbers episode.





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