If you want to set up a social enterprise that will benefit the community, you have two main options, a community interest company or a charity.
Both have different benefits, funding and tax requirements. A CIC Will generally receive most of its income via trade (making money), such as selling something. A charity will tend to rely more on donations and grants (asking for money). They can however overlap.
You need to identify what outcome you want to achieve from the social enterprise group
Within a CIC, as the structure is to make a profit, the board members can be paid. A CIC can have one director, however it is wise to have three unrelated trustees on the board so that you can apply for grants.
A CIC Will need to specify a community that it will benefit. This can be certain people, places, or things. A CIC can make a profit and must have profits at the end of their accounting period, they must be able to pay their investors.
A CIC will pay taxes and business rates. They are able to reward their own directors financially and they tend to have more freedom to be entrepreneurial. Dividends can be paid to directors (which are limited by shares’ only)
Within a charity, trustees or board members are expected to be volunteers. Trustees tend to be paid. A charity will be expected to have a minimum of 3 to 5 trustees.
A charity Will tend to be in operation for certain charitable purposes, or objects. A charity cannot make a profit from its activities, it tends to operate on a hand to mouth, a charity will usually hold 6-12 months operating funds only.
Charities don’t pay taxes or rates. They can also claim back any tax paid on donations. They are very strict on paying minority of trustees.
A charity will need to have its accounts audited if their gross income is more than £25,000