Choosing a legal structure

If you are thinking about starting up a social enterprise, you will need to think about what legal structure is most appropriate.

Tip: Choosing a legal structure for a social enterprise:

• Make sure you choose the most appropriate legal structure for your enterprise only after you have decided your business objectives, and not the other way round.
• Be sure to take professional legal advice before making a final decision.

The eight main structures suitable for a social enterprise are:

1. Unincorporated Association
2. Trust
3. Partnership

These are all unincorporated structures. They are suitable if the organisation is run on a simple and informal basis, and does not plan to take out a lease, buy property, employ people, enter into substantial contracts or become involved in risk-taking activities such as borrowing money. All these activities are subject to legal requirements for which an unincorporated structure (i.e. not having a legal identity) is unsuited. Committee members, however, have personal, legal and financial liability, and can be sued.

The main advantage in opting for an unincorporated structure is the flexibility it offers in the way the organisation is run. There is no regulation other than that laid down within the general law, and no need to complete annual returns or file accounts.

4. Limited Liability Partnership
5. Limited Company
6. Community Interest Company (CIC)
7. Industrial and Provident Society (IPS)
8. Charitable Incorporated Organisation (CIO) (currently being prepared by Parliament)

These are all incorporated structures. They are independent of their members, have a legal identity and are entities in their own right.

The charity model and social enterprise

It is important to be clear that a ‘charity’ is not a legal structure. Charitable status is something that is additional. While it does bring certain advantages, it is also heavily regulated and we outline some of the pros and cons of charitable status below.

Remember: be sure to take professional legal advice before making a final decision.

Useful links

Playwork Partnerships - Getting it right legally: status and structure for play and childcare organisations [pdf 617kb]

Business Link - A guide to legal structures for social enterprises (doc)

NCVO - Legal structures for voluntary organisations

Business Link - Setting up a social enterprise

Voluntary Matters - Registration on a plate - gives tips on considering whether to apply for charitable status 

Interchange legal advisory service offer assistance to VCS

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