How to…select a legal structure for your social enterprise

Choosing a legal structure is one of the first big decisions you’ll make when starting a social enterprise, charity or other project with a social or environmental purpose.

This guide gives a quick overview of common legal structures in the UK (particularly in England and Wales), and key questions to consider. At the bottom, we signpost to more detailed guides and sources of support. This information is a general introduction – it’s not legal or financial advice. Always seek professional support before making a final decision.

What is a legal structure?

Your legal structure is the formal legal form your organisation takes. It affects:

• Who owns and controls your organisation
• How profits or surpluses can be used
• The tax you pay
• What kind of grants, contracts or investment you can access
• Who carries personal liability if things go wrong

There is no legal form called a ‘social enterprise’. That term describes how you operate – trading for social or environmental impact – not your structure.

Common legal structures for social enterprises

You can start informally, then later incorporate (set up a registered legal entity). Common options include:

• Unincorporated association
• Trust
• Sole trader
• Partnership
• Company limited by shares (CLS)
• Company limited by guarantee (CLG)
• Charitable company (CLG + charity registration)
• Charitable Incorporated Organisation (CIO)
• Community Interest Company – limited by shares (CIC – CLS)
• Community Interest Company – limited by guarantee (CIC – CLG)
• Limited Liability Partnership (LLP)
• Co-operative Society
• Community Benefit Society (CBS)

Each has different rules around governance, reporting, tax and use of surplus. Take your time and get advice.

Questions to consider when choosing a structure

The right choice depends on your aims, activities and future plans. These questions can help clarify what you need:

1. Do you need to incorporate?

• Are you taking on land, staff or significant contracts?
• Do you need limited liability to protect individuals?
• Could you start informally and incorporate later?

2. Is your purpose charitable?

• Is your purpose likely to meet charity law (e.g. advancing education, relieving poverty)?
• Or are your aims broader or mixed?
• Do you want or need charitable status – with the regulation that comes with it?

3. How will you raise income?

• Will you mainly trade (sell products/services)?
• Will you rely on grants or donations?
• Will you seek equity or community investment?

Some structures are better suited to trading. Others are better for grants, donations or issuing shares.

4. Who should control the organisation?

• Do you want to keep personal control?
• Do you want wider ownership – from staff, community or beneficiaries?
• Are you happy with trustees who must act in the charity’s best interests?

5. What message do you want to send?

• Would being a CIC or charity help funders and customers understand your purpose?
• Might one structure feel more ‘in tune’ with your beneficiaries or community?

6. What about tax?

• Do you want access to tax benefits like Gift Aid?
• How will you pay yourself or your co-founders?
• Will your structure affect your corporation tax or VAT position?

Tax isn’t always the top factor – but it’s worth understanding.

7. How quickly do you need to set up?

• Some structures can be set up quickly online with standard documents.
• Others (like CIOs) take longer or need more bespoke legal support.

8. What ongoing admin can you manage?

• Some structures involve more reporting, regulation or deadlines.
• Are you ready to deal with a regulator like the Charity Commission or CIC Regulator?

9. Do you want flexibility in future?

• Some structures are easier to adapt over time.
• Others ‘lock in’ your assets or restrict profit distribution, which may help protect your mission. 

Getting advice and useful resources

Before paying for legal advice, it’s helpful to:

• Read introductory guides so you understand the basics
• Clarify your purpose, income plans and values around control
• Make a shortlist of two or three likely options

There are free model governing documents for many legal structures. Decide if a template is enough, or if you need something tailored to your organisation.

Useful sources of support:

• Sector bodies like Social Enterprise UK, Co-operatives UK, or NCVO
• Your local Council for Voluntary Service (CVS) – searchable via NAVCA
• TrustLaw and other pro-bono legal schemes
• Specialist registration services (check credentials first)
• Solicitors with experience in social enterprise and charity law – always agree scope and fees in advance

Final tip

There’s no one-size-fits-all answer – but by being clear about your purpose and plans, you’ll be in a strong position.