|
Logo : Shetland Community Portal   Logo : Shetland Community Portal
|
 

| text only|
site map|
|

 
 
 
 
Shetland Community Toolkit Header

Social Enterprise

There is no legal definition of social enterprise.  The term ‘social enterprise’ refers to a means of operating - a business model – rather than an actual legal structure. Third Sector organisations that choose this model for trading are often referred to as social enterprises, specifically when over 50% of their income is generated from trading.

Social enterprises are businesses that trade specifically for social and/or environmental purposes. They operate in all markets, selling goods and services to local authorities, central government, private businesses and individual consumers.  Social enterprises exist to make a profit just like any private sector business. However, instead of paying dividends to shareholders, any profits or surpluses they make are reinvested into social and environmental purposes; for example providing employment opportunities to the long term unemployed.  Without making a profit, social enterprises cannot meet their social and environmental objectives; they must trade, to be sustainable.

Legal Structure

Social Enterprises can take many forms and the best legal structure for a social enterprise depends on the aim of the social enterprise. Many social enterprises are set up as a company limited by guarantee, a community interest company or an industrial and provident society and many are registered as charities.

Types of Social Enterprise

  • Co-operatives and mutual’s - democratically-owned businesses which give employees, customers or members a stake in the business
  • Credit Unions - a type of cooperative which provides financial service to members
  • Housing Associations - voluntary-managed companies which provide affordable housing for those in most need, with profits being reinvested into building up housing stock
  • Social Firms - commercial businesses that provide integrated employment for people who are disadvantaged or have a disability
  • Development Trusts - owned and managed by the local community, their focus is on economic, environmental, cultural and/or social needs in the community. They aim to generate income through trading activity in order to become self sustaining

 

Criteria for a Social Enterprise in Scotland includes:

  • having a social mission
  • able to measure social and environmental impact
  • set up as a trading business, evidenced by the enterprise earning 50% or more of its income from trading. This can include income from contracts but not grants.  This criteria marks the boundary between Social Enterprise which can be defined as a "more-than-profit" organisation and the rest of the voluntary sector which is defined as "not-for-profit"
  • reinvests all its distributable profits into activities that further its social mission
  • no more than 35% of profits being distributed in dividends (for enterprises that have shareholding investments)
  • constitutionally independent from any public sector body
  • operates in a competitive market but deals in an social and ethical manner

 

Other Community Toolkit Topics to look at:



Further sources of information

We are always interested in your views and experience of using the Community Toolkit. If you have any feedback or questions please complete our Feedback Form

The Community Toolkit is owned and maintained by Skye and Lochalsh CVO Conditions of Use
Last Updated 19/08/2013 16:01

|
|
| Logo : The Scottish Government | | Logo : Leader Plus | Logo : Project part financed by the european union| Logo : Voluntary Action Shetland| Logo : Shetland Charitable Trust|