What is a Social Enterprise?

A social enterprise is a business that trades primarily to achieve a social, environmental, or community purpose, and reinvests the majority of its profits back into that purpose rather than distributing them to private shareholders. Social enterprise is not a legal structure — it is a way of operating. Any number of legal forms can sit beneath the label.

TL;DR: If an organisation earns income through trading and uses those surpluses to pursue a social mission, it is operating as a social enterprise. The term covers a wide range of structures — from community interest companies and co-operatives to trading subsidiaries of charities and ordinary limited companies with a social purpose baked into their articles.

The Definition of a Social Enterprise

The most widely cited UK definition comes from the Department of Trade and Industry's 2002 report, Social Enterprise: a strategy for success, which described a social enterprise as "a business with primarily social objectives whose surpluses are principally reinvested for that purpose in the business or in the community, rather than being driven by the need to maximise profit for shareholders and owners." (Source: DTI, Social Enterprise: a strategy for success, 2002)

This definition has three practical tests. First, the organisation must genuinely trade — selling goods or services, not simply receiving grants or donations. Second, its primary purpose must be social, environmental, or community benefit. Third, surpluses must be reinvested into that purpose rather than extracted as private profit.

What the definition does not specify is a legal form. Social enterprises can be structured as:

• Community Interest Companies (CICs) — a dedicated company structure for social trading, introduced in 2005, with a statutory asset lock and a cap on dividends
• Charitable Incorporated Organisations (CIOs) or charitable companies — where the charity also earns significant trading income
• Co-operatives and mutual societies — owned by members, workers, or the community they serve
• Trading subsidiaries of charities — limited companies that generate commercial income and gift-aid profits to a parent charity
• Ordinary companies limited by guarantee or by shares — where social purpose is embedded in the articles but no specialist structure is used

The Social Enterprise UK (SEUK) definition is consistent with the DTI original: a social enterprise is any business that trades primarily for social or environmental purpose, reinvests its surpluses, and is not driven by the need to maximise shareholder returns. (Source: Social Enterprise UK, All About Social Enterprise)

How Social Enterprises Differ from Charities, CICs, and Companies

The overlap between social enterprise and other organisational forms is genuine, which is why the terminology is often misunderstood.

Charities are regulated by the Charity Commission (in England and Wales) and must exist exclusively for charitable purposes as defined by the Charities Act 2011. They benefit from significant tax reliefs — Gift Aid, business rates relief, exemption from corporation tax on most income — but in return face stricter regulation, cannot distribute any profit, and are expected to rely substantially on donations, grants, or investment rather than commercial trading alone. A charity that earns most of its income through trading may well also be a social enterprise; the categories are not mutually exclusive.

Community Interest Companies are a specific legal form designed precisely for social trading. There are now over 37,000 CICs in existence in the UK, a figure that grew by 12% in the 2024–25 financial year. (Source: CIC Regulator Annual Report 2024 to 2025) CICs are not charities — they do not qualify for charitable tax reliefs — but they are subject to an asset lock, meaning assets and profits must be used for community benefit. Dividends to shareholders are capped by regulation. Every CIC must file a community interest report annually, describing how it has benefited the community. A CIC is almost always a social enterprise; a social enterprise is not always a CIC.

Charitable Incorporated Organisations (CIOs) are an incorporated charity structure introduced in 2013. Like a charitable company, a CIO has legal personality and limits trustee liability, but it is regulated solely by the Charity Commission rather than also by Companies House. CIOs are charities first; any trading activity must either fall within their charitable purposes or be conducted through a separate trading subsidiary.

Ordinary companies — whether limited by shares or guarantee — have no intrinsic social purpose requirement. A company can choose to embed social mission in its articles and operate as a social enterprise in practice, but without a CIC structure or charitable status, there is no legal mechanism compelling it to do so. Some B Corporations are examples of ordinary companies that voluntarily pursue social and environmental standards.

The practical distinctions that matter most are: tax treatment, the legal force of the asset lock, who regulates the organisation, and how much flexibility trustees or directors have over profit distribution.

The scale of the UK social enterprise sector is substantial. According to Social Enterprise UK's Mission Critical State of Social Enterprise Survey 2023, there are an estimated 131,000 social enterprises operating across the UK, representing almost 1 in 42 of all businesses. They collectively turn over around £78 billion and employ approximately 2.3 million people. Notably, 84% of social enterprises in the survey reported paying the real Living Wage. (Source: Social Enterprise UK, Mission Critical — State of Social Enterprise Survey 2023)

Social Enterprise UK and the Wider Ecosystem

Social Enterprise UK (SEUK) is the national membership and campaigning body for the social enterprise movement in the UK. It was founded in April 2002, initially as the Social Enterprise Coalition, and is itself structured as a Community Interest Company. SEUK publishes the biennial State of Social Enterprise survey — the sector's most comprehensive longitudinal dataset — advocates to government, and runs the Buy Social campaign encouraging public and private sector procurement from social enterprises.

Beyond SEUK, the ecosystem includes the Social Enterprise Mark (a certification body that verifies social enterprise credentials), Co-operatives UK, the Access Foundation, and a range of regional support networks and social investment intermediaries such as Resonance and the Social Investment Business.

Social enterprises are not a niche. The GOV.UK Social Enterprise: Market Trends 2023 research found that social enterprises are more likely than SMEs generally to export, to be led by women, and to be based in disadvantaged communities. (Source: GOV.UK, Social Enterprise: Market Trends 2023) They operate across virtually every sector — healthcare, housing, employment support, food, energy, education, and the arts — and are increasingly recognised as delivery partners for public services.

FAQs

Is a social enterprise the same as a charity?

Not necessarily. A charity must exist exclusively for charitable purposes as defined in law and is regulated by the Charity Commission. A social enterprise is defined by how it operates — trading for a social purpose and reinvesting surpluses — rather than by legal form. Some charities are also social enterprises (if they earn significant trading income towards their charitable aims); many social enterprises are not charities (particularly CICs, co-operatives, or mission-driven companies).

Does a social enterprise have to reinvest all of its profits?

The informal definition requires that surpluses are "principally reinvested" for the social purpose — not necessarily 100%. CICs by law can distribute up to 35% of distributable profits as dividends to investors (subject to regulatory caps). The key distinguishing feature is that profit maximisation for private owners is not the primary driver of the organisation's activity.

How do I know if an organisation is genuinely a social enterprise?

There is no single register of social enterprises in the UK. CICs can be verified through the CIC Regulator's public register at Companies House. Charities can be verified through the Charity Commission register. For organisations using the social enterprise label without a specific regulated structure, the Social Enterprise Mark offers independent accreditation. SEUK also maintains a directory of member organisations.

Recommended Next Pages

• What is a Community Interest Company? — A detailed look at the CIC structure: how to set one up, the asset lock, dividend caps, and when a CIC is the right choice.

• What is a CIO? — The Charitable Incorporated Organisation explained: governance, registration, and how it compares to a charitable company limited by guarantee.

• What is Social Value? — Social enterprises are central to social value commissioning. This guide explains the Social Value Act 2012 and how social value is measured in procurement.

• CRM for Small Charities — Whether you run a social enterprise or a charity, managing relationships with beneficiaries, funders, and partners requires the right tools.

Published by the Plinth Team. Last updated 21 February 2026.