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 the new legal structure for charities)
- industrial and provident society
- 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’s website has guidance on CICs, including the forms you need to set one up.
Co-operatives and industrial and provident societies are both types of mutual. A mutual is an organisation owned by, and run for, the benefit of its members.