1.2 How do social enterprises structure themselves?

In light of the preceding section, it should be apparent that without a legal definition, there cannot be a designated legal form created to match it.

Social enterprises can therefore legally structure themselves in one of over a dozen different forms (see tutorial 5), and within this, be recognised as being a different ‘type’ of social enterprise according to their principle focus and interest. The below table defines several of these:

Co-operativesA social enterprise that exists primarily to meet the needs of its Members (defined as sharing a mutual interest or living within a specific community)
CharitiesAlthough charities are a distinct legal form, they are also able to trade, and some generate the majority of their income in this way
Social FirmsA social enterprise that exists to create direct employment for people who are furthest from the labour market (for reason of disability, homelessness, and such like)
Development TrustsA social enterprise that is concerned with benefitting all of a specified geographic area (such as a housing estate, or ward)
Intermediate Labour MarketA social enterprise that exists to create temporary and short-term employment for people who would otherwise not be able to gain full-time employment. The rationale is that through their having had initial employment, they will become more attractive to employers to offer them full time and permanent roles in the future.

And even with the clarification about definitions and types, there are also different ‘models’ that social enterprises can form around in how they pursue their social purpose.

CAF Venturesome has defined these models as being:

  • The ‘step’ model: the social enterprise trading activity is directly linked to generating social benefit (such as renewable energy – the more solar farms erected, the more reliance on fossil fuels is reduced, and the more surplus energy is created to sell back to the national grid, the proceeds of which are used to benefit the community)
  • The ‘trade off’ model: the ability of a social enterprise to achieve potential trading surpluses are purposely limited to achieve social benefits (in a social firm, employee’s productivity will typically be lower than an able-bodied employee might be)
  • The ‘unrelated’ model: traditional trading activities are undertaken which generate profits that are gifted to achieve social benefits (Belu water is a social enterprise that trades in bottled water, but gifts all of its profits to water projects around the world)