Thinking of a setting up a Social Enterprise
Many people get an idea that may help the public or a particular community achieve an economic, social, cultural or environmental mission. And to deliver this they have heard of creating a “Social Enterprise”.
And this is where some people get confused and stuck.
This is because there is no such legal term as “Social Enterprise” in Australia. You can’t go ASIC (Australian Securities and Investment Corporation) or the ACNC (The Australian Charities and Not-for-Profits Commission) and say you want to set up a social enterprise.
You need to determine before you start what sort of structure you want to operate under and how you want to raise funds.
You can be a “For Profit Social Enterprise”. These are enterprises that generate profit to make donations that support other community or not-for-profit organisational activities. Thank You Water is an example of this. In this version you typically have shareholders who would be entitled to their share of the assets if the social enterprise closes.
You can be a “Not For Profit Social Enterprise”. These are enterprises use their assets for the stated purpose of the enterprise. In this version you typically have members who are not entitled to any of the assets if the social enterprise closes. These assets must be distributed to another enterprise with similar objects.
A “Not For Profit Social Enterprise” can be a charity and can apply for what is known as “deductible gift recipient”, which allows you to receive tax deductible gifts or donations.
If you are an Aboriginal and Torres Strait Islander, you can have both under a for-profit or not-for-profit Indigenous corporation.
And you can have hybrids.
Hence why people get confused and stuck
Thankfully some organisations understand this and publish some handy free guides. One such organisation is Justice Connect with their Not-for-profit Law program. Click here to access their guides around setting up a social enterprise.
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