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Frequently Asked
Question The following are some of the questions we get asked on a regular basis. Am I a Social Try our Structure-o-Matic and find out. The formal definition of a social enterprise adopted by the UK Government is “businesses with primarily social objectives whose surpluses are principally reinvested for that purpose in the business or community, rather than being driven by the need to maximise profit for shareholders and owners”.
This is obviously a fairly broad definition so you really need to ask yourself the following questions:
If you can answer yes to all three of the above questions there’s a pretty good chance that you’re what most people would consider to be a social enterprise.
I’m thinking of starting a business, should I become a
social enterprise? Don’t start a social enterprise because you think it’ll be easier than starting a private business.. it won’t. Start a social enterprise because you genuinely feel that you’d like to contribute to the common good.
If I become a Social Pretty unlikely, but anything is possible. In practice most social entrepreneurs can make a good living from their businesses and also gain the respect of their peers. Are Social enterprises a new thing? No, but they have become much more visible in the media in the last few years due to Governmental support for them. Can I set up a social enterprise on my own? Yes, but if you do you'll find it difficult to access grant funding. You really need at least one or two other people who aren't relatives or family members. We're a group looking to set-up a business where we all have an equal say in how it’s run, what do we do? Sounds like you may be perfectly suited to becoming a Co-operative. There are various kinds of Co-op, but the one thing that unites them all is that each member has one vote in how things are done. Have a look here then call or email us to arrange a meeting. Are Co-operatives social enterprises? Yes. Co-operatives are social enterprises because of the social nature of their structure. In a Co-operative all the members have equal control and the Co-operative exists for their benefit. You may find that some people will argue that smaller Co-ops (such as worker Co-operatives) aren't social enterprises, but you'll find that large consumer Co-ops are nearly always accepted as social enterprises. Can I get some grants? Do I need a business plan? No, but it's usually a good idea. A business plan has two main functions.
You can create a free business plan at www.businessplanningonline.co.uk. Just work through the steps and when you reach the end you'll have a business plan. It's usually a good idea to seek some external advice when writing a business plan as well, a qualified adviser will be able to help you spot any bad assumptions you've made and so on. I haven't done much market research Do some more.. please.
The biggest cause of enterprise failure in the Who can help me set-up? Humberside CDA has been assisting social enterprise since 1985.. 23 years and still going strong. Unlike every other support agency in Humberside it’s all we do.. support Co-ops and Social Enterprises. Drop us an email info@humbersidecda.info or call Jon Clarke on 01482 449877 for a chat. What legal structure do I need to adopt? Try our Structure-o-Matic and find out. Do Social Enterprises need to be “not for profit”? No. I'll clarify this by explaining that the only “for profit” social enterprises are generally Co-operatives. Co-operatives are considered to be social enterprises because of their democratic structure (one member, one vote). If you want to be a Social Enterprise and don't want to be a Co-operative you'll normally need to be “not for profit” and “common ownership”. Of late, there has also been a lot of debate within the social enterprise movement and many people feel that an organization can still be a social enterprise if the majority of the profits are put to social uses, allowing for some enterprises where a small number of investors can reap large rewards still.. something we don’t think is right. Okay, so what does “not for profit” mean? In order to stay active you need to make a profit. People in the third sector often use the term “surplus” rather than profit.. but it means a similar thing. Your profits are what cushion you against unexpected problems and what let you expand. “Not for profit” means that any profits you make are retained in the organisation, or used to make grants/support other socially beneficial activities, rather than being taken out by the members and put in their pockets. And Common Ownership? Common ownership means that the assets of the organisation (building, cash etc..) don't go the members when the organisation closes down. Instead, they are given away to other like minded organisations. What is mutuality? Some organizations are “mutual” and may benefit from a special tax status called “mutual tax status”. In such organizations the beneficiaries of any profits are the customers and vice versa. It is a basic principle of taxation that you cannot make a profit out of trading with yourself, which is the principle which mutual tax status is based on. Mutual tax status is granted by HMRC on a case by case basis but, as a general rule of thumb, a mutual organization cannot be common-ownership and cannot be not-for-profit, which rules out most social enterprises. The most common types of mutuals are building societies and some types of Co-operative consortia. What’s an exempt charity? Most charities are
registered charities (registered with the charities commission) but there are
also a number of exempt charities. For various reasons exempt charities do
not fall under the commissions remit but still have many of the benefits of
being charities. Societies for the benefit of the community (Bencom’s) are one of the two types of Industrial and
Provident society (IPS’) which are often exempt charities. Exempt charities
still have to be for public benefit and pass the public interest test like
any other charity. I've been told that I should set-up as a “CIC” or “Community Interest Company”, what is it? The CIC is a new legal model created by the labour government in 2005. CIC's are regulated (in a similar way to charities). They differ from other companies in two main ways:
A CIC is best thought of as a half-way house between a private not for profit limited company (the most common legal model in the third sector) and a charity. Some people would say that it combines the best of both models, others would say it combines the worst of both. What's in it for me/us? First and foremost social enterprises are about the social benefit they give back to a community. As a social entrepreneur (someone who starts up and runs a social enterprise) it's reasonable to look to make a reasonable living out of the enterprise, but if you're looking to get a big house in the country and a rolls royce best look elsewhere. The same applies to Co-operatives because any gains made are shared equally. As a very quick analogy, If a business made one person wealthy and their employees comfortable the same business run as a Co-operative would make everyone well-off. How do I register myself as a “social enterprise”? You can't. There is no such thing as a “social enterprise” legally speaking, they're not like charities. The nearest thing you can do to “registering” yourself as a social enterprise is to join a relevant association, such as Social Enterprise Yorkshire and Humber. There are “social enterprise marks” beginning to appear but these all have different criteria and measure different things. What do you charge for assistance? If you’re a Co-operative we may be able to assist you for free via the Co-operative Enterprise Hub. Otherwise, the first hour is free (though there will be a charge if we need to travel to you). After that we charge £60 per hour. What is a Co-operative? Click here for a detailed FAQ concerning Co-operatives.
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