Set up a social enterprise

Limited companies with a social purpose

Social enterprises often take on the form of a limited company. This is a more accountable form than, for example, an unincorporated association.

Limited companies have an 'objects' clause that sets out the company's aims or purposes. Although these objects can be commercial, if your business is a social enterprise, they may relate to social and/or environmental objectives such as regenerating an area or providing employment for people with learning difficulties. Social enterprises that are registered charities must have an object that the law defines as charitable, such as relieving financial hardship or promoting education.

Types of limited company

There are two incorporated forms to choose between when setting up a social enterprise as a limited company:

• Private company limited by shares (CLS) - shareholders each hold shares in the company. Their liability is limited to the amount unpaid on shares they hold. A public limited company (PLC) differs from a CLS in that its shares can be sold to the general public.
• Private company limited by guarantee (CLG) - each of the members gives a guarantee for a certain sum that will be put towards the company's finances if the company is wound up. A CLG cannot raise finance by issuing shares, nor pay dividends to its members.

Limited companies often underpin other forms of social enterprise - such as Community Interest Companies (CICs) - in which case you will have to meet additional requirements. See the page in this guide on Community Interest Companies.

The issues are complex and you should seek professional advice. See our guide on how to set up and register a limited company (private or public).

Registration and costs

All limited companies - including CICs - must register (incorporate) and file annual returns at Companies House. Limited companies must also submit a set of memoranda and articles of association. A standard incorporation certificate costs £20.

Limited companies, with the exception of CICs, can also be set up as charities if the organisation has exclusively charitable objects and is for the public benefit, and should (in most cases) apply to the Charity Commission to be registered as a charity. However, it is very rare for a CLS to be a charity. See the pages in this guide on charitable social enterprise and on Community Interest Companies.

Subjects covered in this guide

• Introduction
• Unincorporated associations
• Trusts
• Limited companies with a social purpose
• Community benefit societies
• Social enterprises as registered charities
• Community Interest Companies
• Charitable incorporated organisations
• Here's how being a social enterprise works for our business

Print options - What are my print options - Opens in a new window

• Add guide to my print portfolio (print later as PDF)

Email options - What are my email options - Opens in a new window

• Tell a friend about this page
• Send me an email alert when this guide changes