What are Social Enterprises?
A social enterprise is not a legal entity like a corporation.
There is no formal definition for social enterprise. There are several definitions as follows:
A social enterprise is an organization with primarily social objectives and an overall mission to serve the public good. In addition to providing social programs and/or support services, a social enterprise will operate one or more profit enterprises to generate earned income. Social Enterprise organizations reinvest their earned income into realizing their social mission; they pursue the development of the community rather than being driven by the need to maximize profit for shareholders and owners.
“Social Enterprises are dynamic, progressive businesses that we can all learn from. They experiment and innovate, and have the advantage of being able to draw upon the best practice in the voluntary sector, as well as the entrepreneurial flair that exists in the best of our companies.”
– Patricia Hewitt, Secretary of State for Trade and Industry, UK
(excerpts from http://www.socialenterprise.ca/social-enterprise)
There is no single way to achieve a social enterprise. If you are already operating a non-profit organization or charity and want to create a social enterprise, here are questions to consider:
- What’s the fundamental program, activity, good or service of the organization?
- Where do you expect to find capital for the organization (in the beginning and ongoing)?
- What is the nature of the personal benefit you or the founder of the organization wants or needs to derive from the organization’s activity? Is it money by salary, return of capital provided, satisfaction of doing good work or some combination?
- How important is control for you in the short and long term? This will also play a role in how we set up a social enterprise.
- Do you have any branding issues that need to be taken into consideration? Like do you want the public to see you as non-profit organization (“NPO”) or charity? Or it doesn’t matter?
- How soon do you want your ‘social enterprise’ to be up and running?
- How much money and time is budgeted to the start-up legal and accounting expense as well as the ongoing expenses?
You can expect and should plan for legal advice because ‘social enterprises’ do not have any one set of applicable legislation. You will need constating documents, potentially at the federal and provincial (and even extra-provincial) level. It all depends on the various forms of the underlying organizations, which makes it a multifaceted and complex business structure that I don’t advise you do without legal counsel to navigate the current legislations and changes over time.
You will also need accounting advice because there are Income Tax Act rules that must be followed or there can be penalties by the CRA depending on what underlying organizations are used to create the social enterprise.
Please contact us to help you develop your social enterprise.
