Social enterprises often get misunderstood. Some people think they are charities in disguise, while others assume they are not real businesses. In this episode of I Hate Numbers, we break down what social enterprises really are, how they operate, and how they successfully combine purpose with profit. We explore the most common UK social enterprise models, how they differ from charities and traditional companies, and what you should consider if you are thinking of starting, running, or advising one.

What Is a Social Enterprise?

A social enterprise is a business that exists to solve a social, environmental, or community problem while still making money. Profit is not the enemy. Instead, profits are reinvested to support the organisation’s mission rather than simply enriching shareholders. Unlike charities, social enterprises trade commercially. They sell goods and services, employ staff, pay taxes, and face the same commercial pressures as any other business.

Social Enterprises vs Charities

Charities usually rely on grants, donations, and fundraising. Social enterprises rely primarily on trading income. While charities focus on public benefit, social enterprises focus on sustainability through commercial activity. A charity is not automatically a social enterprise, and a social enterprise is not necessarily a charity. The structure you choose matters.

Community Interest Companies (CICs)

Community Interest Companies are one of the most popular social enterprise structures in the UK. They are designed for organisations that want to make profits but lock those profits and assets into community benefit.

Key CIC Features

1. A clear community purpose must be demonstrated at registration
2. An asset lock protects profits and assets for community use
3. Can be limited by guarantee or by shares
4. May pay limited dividends if structured correctly

CICs often sit between traditional companies and charities, making them a flexible and popular choice.

Co-operatives and Community Benefit Societies

Co-operatives operate on democratic principles. Members have equal voting rights, and profits are shared or reinvested for collective benefit. Community Benefit Societies are regulated by the Financial Conduct Authority and are often used for community shops, renewable energy projects, and local initiatives. They can raise funds through community shares and embed democracy into their structure.

Can a Private Company Be a Social Enterprise?

Yes, a standard limited company can operate as a social enterprise. However, without an asset lock or legal obligation, trust must be built through transparency and genuine reinvestment of profits. Where social impact is central, we usually recommend using a structure that legally protects the mission.

Charitable Incorporated Organisations (CIOs)

CIOs are charities with legal status and limited liability. They are regulated by the Charity Commission and can access tax reliefs such as Gift Aid and business rates relief. They take longer to set up and carry greater trustee responsibilities, but they suit organisations with purely charitable objectives.

Choosing the Right Structure

Choosing the right structure starts with your purpose. You should consider who you help, how you generate income, whether you need investment, and how much control or restriction you are comfortable with. In many cases, organisations start as CICs and later convert to charities once the model is proven.

Key Takeaways

Social enterprises are not soft or fluffy. They are commercial, disciplined, and impactful businesses. They create jobs, deliver services, and reinvest profits where they matter most. If blending purpose with profit matters to you, a social enterprise structure could be the right path.

Episode Timecodes

1. [00:00:00] – Introduction to social enterprises
2. [00:01:31] – What defines a social enterprise
3. [00:02:28] – Social enterprises vs charities
4. [00:03:00] – Community Interest Companies (CICs)
5. [00:05:00] – Co-operatives and community benefit societies
6. [00:06:41] – Can private companies be social enterprises?
7. [00:07:22] – CIOs and charitable structures
8. [00:08:41] – How to choose the right model
9. [00:09:45] – Final thoughts and next steps

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Welcome to this week's episode of I Hate Numbers, and in today's podcast episode, I'm going to be diving into the world of social enterprises. Now, before you switch off, thinking this is all about fluffy feelings, charity tea dances, and about doing good stuff, just hold on a minute. I'm going to be talking about businesses,

yep businesses, that make money i.e. profit and actually make a difference. So grab yourself a drink of choice, put on those headphones if you're out running, keep those hands on the steering wheel if you're driving and let's crack on.

Now, did you know there are over a hundred thousand plus social enterprises in the United Kingdom alone? They contribute humongous amounts of money to the economy. They employ an immense amount of people here, and they are sectors, they are businesses in their own right, from generating several thousand to several million pounds worth of profit and turnover.

That's not a small change, that's an immense impact that's being made. So yes, social enterprises do matter both financially, socially, and economically. Now, in today's episode, I'm going to be focusing on understanding what social enterprises actually are, how they differ from traditional businesses or charities for that matter.

And the types of business models and legal structures that exist that you may wish to adopt. Now, this episode is essential if you're thinking of starting one, working for one, or advising one, and I've been very fortunate in my 30 years plus in business of working with organisations of various types, from social enterprise

to charities, to private businesses as well. Now firstly, what is a social enterprise? It's very often misunderstood. It's not just about being good and doing good stuff. It's a business that exists to solve a social or an environmental or a community problem, while at the same time making money. Those two go hand in hand.

Yes, it makes money and it's the profits that are generated that are there to support the mission, not just in somebody else's pocket. Think of it like this. If a private business says, how much profit can we make? A social enterprise will say, how much good can we do with the profits that we generate?

Social enterprises sell goods and services just like any other business. They have the same challenges. They adopt business practices, but it's what they do with the money is where things change. Profits are reinvested into their course, whether that is supporting vulnerable people, protecting the planet, or creating fair work and opportunities for others.

Now it's important to emphasise charities are not necessarily social enterprises. Charities, a great deal of them, will rely predominantly on donations or grants to operate. They don't necessarily, all of them operate commercially, but they operate in ethical lines. The monies that they generate are going towards a charitable purpose here.

But a charity is not necessarily a social enterprise, and a social enterprise is not necessarily a charity. Let me have a look at the main models that are currently used in the United Kingdom. Model number one is a Community Interest Company or a CIC for short. Now this is one of the most popular social enterprise models operating in the United Kingdom, and it's designed for businesses that want to make a profit but use it for community

good. I've personally seen a growth in the use of CICs over the last 10, 15 years. They still represent a small proportion of the overall companies that are incorporated the United Kingdom. They are a growing model. Now these are designed for businesses that make profits, want to make a profit and should be making a profit, but use those profits of community

good. So what makes a CIC different? Well, from the beginning, when you create a CIC, you have to show a clear community purpose. You have to file a community interest statement when you register and you commit to something called an asset lock, meaning those assets and profits that the organisation has

must go to another beneficiary organisation. Those assets and resources are not to be used for the benefit of the individuals. If your CIC ceases to exist, then typically, and certainly what we would recommend is those assets that you built up go to another beneficiary organisation. But the resources are there for the benefit of the community,

not for the individuals who run the CIC. Now in itself there are two types of CICs. You will encounter more of this in next week's podcast, but for now, let me give you a brief overview. You either have a CIC that's limited by guarantee, or you have a CIC that's limited by shares, which means you can attract private investment and that means it's possible to distribute profits by way of dividends

to those individual investors or corporate investors. A CIC is a bit of a hybrid, a halfway house between a charity and a private company. It's not unusual, by the way, for a charity to actually have a separate subsidiary or an entity that's constituted as a CIC to run their trading commercial activities.

Risk taking is permitted without putting the charity assets at risk. The second model is the cooperative model, and again, I've seen a growth in the cooperative model over time, and this model puts the power in the hands of its members, not just an individual group of directors, or the boardroom. It’s based on democracy and the quality.

Each member has a say as to how those profits are distributed and shared. Members can be staff, customers, or the community. Those popular example of a cooperative society, surprising enough is the Co-Op supermarket, fair trade businesses, energy cooperatives, community pumps. They all follow these rules, and the core principles are: one member, one vote, shared ownership, and collective benefit.

It's perfect if you want that idea of shared control and a strong ethical backbone. Another model is the Community Benefit Society. It's a type of industrial providence society or an IPS. An IPS or Community Benefit Society is regulated by the financial conduct authority, not Companies House, which is the regulator for most corporate bodies.

Now, a Community Benefits Company can raise money through community shares, apply for charity-like tax benefits. Typically, it can be exempt from corporation tax on any surpluses that are generated, and it embeds this idea of community democracy in its structure. So if you're thinking of setting up a shop in your village, your town, a renewable energy project, or a sports club, then this model might be ideal for you.

Now, one other model I need to mention here is that a private company itself can actually be a social enterprise. You don't actually have to be a CIC, a charity or a co-op to be a social enterprise. Even a standard limited company can be one, but it's the commitment, not just words for the sake of it where it commits to social aims and reinvest the profits accordingly.

You need to have a clear mission statement and ethical practices and a transparent way of showing what you do. Now, private companies in themselves, lots of people use that phase where you know, we have good intentions. We are social enterprise in nature, but you actually have to show and demonstrate a proportion of those profits are going towards social good.

You need to build trust with funders and audiences. There's no asset lock or legal obligation to reinvest profits unless you say so. My personal preference is, is that if you are taking social enterprise seriously, then do not do a private company. Now, there is also the idea of a CIO, all these acronyms floating around, a Charitable Incorporated Organisation.

Now, a charitable organisation has the benefit of any accounts that are submitted only go to the Charity Commission as opposed to a lot of charity companies will submit documents and accounts to Companies House as well as to the Charity Commission itself. One filing is all that's needed. Now, the CIO is a structure that's only for charities.

It's regulated by the Charity Commission. It gives that legal status, limited liability, the ability to access things like Gift Aid, business rates, relief. Profits if they're used for charitable purposes are exempt. Now, this is a more complex model in the sense of the time it takes to get incorporated.

There's a much longer lead time between submitting an application and getting that charity status. There's more obligations placed on the individual trustees and directors compared to other social models that we've outlined. You've got her charitable aims, public benefit, and trustees. You can't just set one up willy-nilly overnight and the time taken

can range anything from a few weeks to several months between submitting the application and getting approval. Now, how do you decide which model you should choose? Now, for me, it's this idea of substance follows form. You always have got to consider what you are planning to do. Start with your purposes, what your objectives are over the, say, next two or three years. What's your main goal?

Who are you helping? How are you going to raise money? Do you want outside investment? Do you want restrictions placed on you and your fellow trustees? Have a business and a financial activity plan, and then decide the structure that best suits. Now, it's not unusual, by the way if you think charitable status is your long-term goal, you might set up a CIC to begin with, and then you can convert that to a charity down the line. Get the model wrong, and that might deny you opportunities.

It might have an impact on tax. And it might have an impact on accessing funding and other such matters as well. Now, social enterprises are not soft, fluffy, or weak. They are businesses. Their objective is to make profits, but it's what those profits are used for that differentiates them from their private sector

Cousins. They're smart, impactful and essential. They run schools. They create jobs. They build communities. They clean oceans. They have an environmental impact, and yes, they pay wages, they file taxes, and they grow. Now, whatever your choice is, what matters fundamentally is your mission and how you use those profits.

So if you are ready to blend purpose with profit, a social enterprise model could be for you. Now, final thought, if you are running or planning a social enterprise, maybe you worked with one or want help with setting one up, well speak to your advisor or speak to us. We have dealt with social enterprises for nearly three decades here.

Check out the show notes, book a call. We'll help you choose the right structure, build a sustainable plan, and stay compliant while staying true to your mission. Until next week, folks, plan it, do it and profit.