I am interested in setting up a social enterprise company but can't decide on what entity to choose. What are the pros and cons of a cooperative, a charity and or a community interest company. What would you recommend for what type of enterprise?
Answers (6)
Laura, that's a BIG question! A lot depends on what you want to do with the business. I have no experience of co-ops, charities require significant regulatory requirements to be met and CICs have asset locks that may not be appropriate. A simple, not-for-profit company, limited by guarantee is often fit for purpose. But you really need a lawyer with experience in this field to explain the differences in the context of what you want the business to achieve. Good luck! Nigel
Cristina F.
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A cooperative is the most fair.
David M.
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You need specialist advice but, as a general principle, once you have worked through the tax implications of each option, ask yourself, are you a leader or are you a team person. Many of these forms of organization depend on people with more cooperative spirit working together. In many cases, you may have to rely on volunteers. If you are instinctively a "boss" you may drive away many of the people you need for your organization to succeed. Think carefully about who you are as a person before you go into this area of social enterprise.
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Chris R.
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The three are not directly comparable. A charity is a tax and legal status, not a form of organisation - charities can be trusts, companies or toher forms of organisation. They are heavily regulated and cannot distribute profits to members. Social enterprise companies are less heavily regulated but still have an asset lock to prevent significant distriburions of profit. Only charities or social enterprise companies are likely to attract public funding or donations. Cooperatives anre an ownership structure - a company largely owned by its workers or participants. They can be fully commercial, profit-making ventures.
Chris (English law)
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Wallace J.
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LLC
Rick C.
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Laura, the question you ask is only properly answered in light of more important questions. I've posed many of these in my article on social enterprises linked below.
As I tell all my clients starting organizations, you need to start with your goals and business model. (And trust me, every organization has a business model -- what comes in, what you do with it, what goes out, and what you do with what's left over.)
So start by defining what you want to do, on a day to day and big picture basis. Then, you take that description and give it to someone like me, a corporate lawyer, and you can get a specific recommendation that fits your particular circumstances. Those circumstances include the state you're in, tax considerations, financing matters, distributing surpluses (e.g., profits), and control issues.
I'm very good at what I do, but I can't give you a specific answer without knowing what your vision is and then sorting through your goals. No one can.
Good luck.
