You must choose a business structure if you're starting a business that helps people or communities (a 'social enterprise').
If you want to set up a business that has social, charitable or community-based objectives, you can set up as a:
- limited company
- charity, or from 2013, a charitable incorporated organisation (CIO is a new legal structure for charities)
- registered societies (previously known as 'industrial and provident societies')
- community interest company (CIC)
- sole trader or business partnership
If you're setting up a small organisation like a sports club or a voluntary group and don't plan to make a profit, you can form an 'unincorporated association' instead of starting a business.
Community interest companies (CICs)
A CIC is a special type of limited company which exists to benefit the community rather than private shareholders.
To set up a CIC, you need to apply to Companies House, and:
- include a 'community interest statement', explaining what your business plans to do
- create an 'asset lock'- a legal promise stating that the company's assets will only be used for its social objectives, and setting limits to the money it can pay to shareholders
- get your company approved by the community interest company regulator - your application will automatically be sent to them
The CIC regulator has guidance on CICs, including the forms you need to set one up.
Co-operatives and registered societies (previously known as 'industrial and provident societies') are both types of mutual. A mutual is an organisation owned by, and run for, the benefit of its members.
The following organisations can give you further advice on setting up and running a social enterprise:
- Social Enterprise UK - offer advice, case studies and guidance on business structures for social enterprises
- Firstport - offer advice, training and funding for social enterprises
- Social Enterprise Scotland - give advice on starting and funding a social enterprise
- Senscot - create opportunities for social enterprises to network and provide legal advice through Senscot Legal
- Social Firms Scotland - help social firms (a type of social enterprise) by giving advice, training and by running events
- Just Enterprise - offer one-to-one advice sessions and training for start-ups and established social enterprises
- Social Investment Scotland - help social enterprises by giving them interest free loans
You can also find out about legal forms for social enterprise.