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Many successful social enterprises in New Zealand combine the best aspects of commercial management and sustainability with a social ethos or mission. Are you entrepreneurial or innovative? Perhaps you have a great idea for a business. In that case, it can be personally fulfilling and motivating to build a business that achieves an environmental, cultural, or another socially beneficial purpose. However, it can sometimes be tricky to know where to start. This article will explain: 

  • what a social enterprise is; 
  • how to structure a social enterprise in New Zealand; and 
  • the best way to start one. 

What Is a Social Enterprise?

There are many ways to define a social enterprise. Defined broadly, a social enterprise is an organisation that has a social mission of some sort and which makes money (like, through selling products or services) to advance that mission. The term ‘enterprise’ is purposefully inclusive, including charitable trusts as well as companies and partnerships. The key element that unites social enterprises is their social mission.

There is a range of different kinds of social missions that a social enterprise can have. These can include social, environmental, cultural or welfare orientated goals and aims. For social enterprises, these socially beneficial aims are at the centre of their work and how they run their organisation. The norm is for most of the enterprise’s profits to be reinvested towards achieving their stated purpose. However, sometimes a social enterprise may instead give that profit to charities pursuing similar goals. 

How to Structure a Social Enterprise

Social enterprises can take the form of several different business structures. The most popular of these for achieving social ends are companies and charitable trusts. Sometimes you see a combination of these structures, such as a company owned by a trust. Companies offer limited liability and a flexible business structure. Likewise, budding entrepreneurs can take on investment and like-minded stakeholders in their pursuit of a social mission.

Business structures are particularly important to social enterprises as they balance a need to be financially sustainable with the pursuit of their mission. This is what tends to set social enterprises apart from not-for-profits dependent on donations. Rather than depend on donations, social enterprises tend to try to develop reliable revenue streams to drive socially beneficial activities or programs. Alternatively, the source of revenue itself helps those societal benefits). This can be a tricky balance to get right, but an incredibly fulfilling and sustainable enterprise can result from careful planning and execution. 

The Best Way to Start a Social Enterprise

The best way to start a social enterprise is to have a great idea or innovation for a financially sustainable business. You should orient this business idea towards some socially beneficial goal, such as reducing poverty or helping the environment. There are no guidelines on how exactly you should set up a social enterprise. However, you might want to consider looking at existing not-for-profits, charities or social enterprises in your idea of interest.

Another angle is to offer support to an existing not-for-profit by running a new enterprise with their endorsement. You can aim to create a new revenue stream for them to pursue their social goals.

It is fantastic to have a clear goal and aim to improve society through business. However, if the social enterprise will be your full-time job and employment, you should plan and think carefully before quitting an existing job. It is hard enough to build a sustainable business from the ground up, and it can be especially tough when you are also trying to achieve multiple social goals and aims. It can also be hard to mix the harsh commercial realities of bootstrapping a new business with the ethos and logic of a not-for-profit. However, on the plus side, you may find it easier to receive support and funding if you have a clear mission to build your business around.

Key Takeaways

A social enterprise is any business with a clear social mission or purpose and generates revenue to advance those aims. They comprise all kinds of businesses and charitable structures, though common features are the socially beneficial purpose of their work and financial sustainability. The best way to start a social enterprise is to have a great idea for advancing a particular social mission through a revenue-generating business. Likewise, research how your idea fits existing enterprises or services in the relevant sector.

If you would like more information about social enterprises or how to start one yourself, contact LegalVision’s business lawyers on 0800 005 570 or complete the form on this page.

Frequently Asked Questions

What is a social enterprise?

A social enterprise is an organisation that has a social mission that makes money to advance that mission. Social enterprises aim to be financially sustainable and make a difference in the world through their business activities.

Does a social enterprise have to be a company?

No, a social enterprise can be a range of different structures, including any type of business.

Can social enterprises make large profits?

Social enterprises can make significant profits through their work. However, these profits will usually be reinvested in the enterprise’s services or generally towards the enterprise’s social mission.

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