Choosing the structure of a social business

There is a lot of choice when it comes to legal form and organisational type for a social business and this often leads to confusion. 

The best legal form for your enterprise will depend on several things. The key dependencies are:

  • exactly what you are going to do – your trade
  • who will own and control the enterprise – your governance
  • how you will raise the money – finance
  • what you will do with any surplus or profit – application of surplus
  • what you will do with your assets if you wind up – dissolution and ownership

You should have determined much of the above through your business planning. You should then be in a position to determine the most appropriate legal form to fit what you want to do. Do not choose your legal form and then design your enterprise to fit – this is a common error at start-up. Be wary of advice that advises a legal form without a thorough look at exactly what sort of business you want to create.

There are several tools available to help you choose the structure of a social business. If you do not have the expertise in-house, you should involve a development worker to support your choice and help register it with the relevant regulator. Your choice of development worker will depend on exactly what sort of enterprise you intend to create and much of the funding for social business has lists of approved development workers.

You can find an interactive tool to help you identify the most appropriate legal form for your social business on the Co-operatives UK website. 

Temporary structures

It is common for a social business involving the community to create a temporary unincorporated association to carry out the early parts of start-up. This allows them to obtain a bank account and seek funding and it provides a structure to co-ordinate any working groups. Once the more formal structure is created the temporary unincorporated association can be wound up.