It is imperative that the appropriate legal structure is chosen to suit your business model. There are many different options available to social enterprises and the first stage is whether the company should be incorporated.

If your organisation is unincorporated then it will be: –

Sole Trader

There is no requirement for registration or a constitution. A Sole Trader sets up and manages the organisation themselves.

Partnership

These are normally found in Solicitors Practices and GP surgeries. It is formed by two or more persons that share a common goal for the purposes of profit.

Unincorporated associations

These are groups united by a common interest for example sports clubs. Usually governed by a constitution setting out the rules of the organisation and board members are elected.

If an organisation is unincorporated it does attract greater freedom to operate and certain tax benefits.

The key issue to consider when deciding to incorporate is personal liability of the sole trader or partner. When a company is incorporated it develops a legal personality which limits the risk of its members. This can be of benefit to those organisations that have property interests of contractual obligations. It also provides a clear structure for governance.

Incorporated structures

There are many different forms of incorporation and examples are shown: –

1. Company Limited by Shares (CLS)
2. Company Limited by Guarantee (CLG)
3. Community Interest Company (CIC)
4. Community Benefit Society
5. Co-Operative Society
6. Limited Liability Partnership
7. Scottish Charitable Incorporated Organisation (SCIO)

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