Charity vs Social Enterprise
If only charities came in front of your eyes when you thought about organizations involved in doing work for the welfare of the poor and underprivileged, think again. Though nearly all organizations have a social face, that is they like to indulge in welfare programs to have a good brand image for themselves, there are organizations running just like other business and making profits but diverting the profits for social causes. These are known as social enterprises, quite distinct from a charity and other businesses. This article will point out the differences between a charity and social enterprise by talking about their features and functions.
It is hard to distinguish between a social enterprise and any other normal business as both work to reap profits though a social enterprise strives to maximize the value of money of its customers. It is the difference in the way the profits are diverted that differentiates a social enterprise from a normal business. Social or environmental purpose is central to all activities of a social enterprise. All the profits made by a social enterprise are reinvested to further their mission of a positive change in the society.
A charity on the other hand is formed solely to carry out welfare programs and is dependent upon donations to carry out its mission. It does not do any business activities as such to make any profits.
Difference between Charity and Social Enterprise
The major difference between a charity and a social enterprise lies in the manner in which the two are incorporated or come into existence. Whereas a charity is accountable to the Charity Commission, a social enterprise has to submit its annual returns to Companies House if it is registered as a Company Limited by Guarantee. If however it is registered as a Company Limited by Shares, it sends its returns to CIC Regulator.
While a charity never makes profits, more than 50% of the profits generated through business activities of social enterprises are reinvested into achieving their declared social mission. Another difference is the way charities and social enterprises generate money to fund their activities. Whereas charities are all the time facing shortage of funds and rely on grants and donations from foundations and government largesse, social enterprises generate funds for social causes on their own through legal trading activities.
Charities vs Social Enterprises
• While both charities and social enterprises have similar social objectives, social enterprises work like any other business and also pay taxes on profits. On the other hand, charities are formed solely to carry out their stated social mission.
• While charities make no profits and reinvest all the donations they receive for social causes. Social enterprises engage in business activities and reinvest the profits they so make.