Does the term "social enterprise" have a legal meaning?

Question

There is a sector of public opinion that often refers to "social enterprise" as if the meaning of this term were well-known. Does the public understand what this term means? Or only specialists? Here is something I just read:

"Business enterprise, i.e. capitalism, must be measured in terms of monetary profit. That rule is not arguable. A business enterprise must make monetary profit, or it will merely cease to exist. That is an absolute requirement. But it does not follow that this must necessarily be the final bottom line and the sole aim of the enterprise. How this profit is used is another question.

It is commonly assumed that profit will enrich enterprise owners and investors, which in turn gives them incentive to participate financially in the enterprise to start with. That, however, is not the only possible outcome for use of profits. Profits can be directly applied to help resolve a broad range of social problems: poverty relief, improving childcare, seeding scientific research for nationwide economic advancement, improving communications infrastructure and accessibility, for examples – the target objectives of this particular project plan.

same financial discipline required of any conventional for-profit business can be applied to projects with the primary aim of improving socioeconomic conditions. Profitability provides money needed to be self-sustaining for the purpose of achieving social and economic objectives such as benefit of a nation’s poorest, neediest people. In which case, the enterprise is a social enterprise."

If this definition is accepted, does a "social enterprise" have a legal meaning.

Is it the same as a "non-profit"? or are their significant differences? Thank you!

Answer 1

a "for profit business" is one in which profits may be, at lest potentially, distributed to owners, who may be shareholders or partners.

A "non-profit organization" is one in which surpluses (which is what they earn instead of profits), if any, cannot legally be distributed yo any owners or participants. Often there are no "owners", but the organization may have "members". The members may be able to determine organization policies to some degree, and may be able to chose members of a board of directors or other governing body.

A "non-profit organization" need not be organized for any particular purpose, and need not provide something generally recognized as of "social value" or aim at "improving socioeconomic conditions". Such an organization may be sustained by profits on operations, or by donations, or by government funding, or some combination of these.

While members may in some way benefit from the actions or activities of a non-profit, they may not directly share in any profits made.

Churches, charities, and museums are commonly set up as non-profits. So are many universities. So are professional associations such as the American Bar Association (ABA), the Institute of Electrical and Electronic Engineers (IEEE), or the Association for Computing Machinery (ACM). I myself am a member and have been an officer of the ACM. Recreational organizations such as the American Contract Bridge League (ACBL) and sporting clubs are also non-profits. Labor unions are also typically set up as non-profits. So are social clubs.

In many jurisdictions, some but not all non-profits are partially or totally exempt from taxation.

In my experience the term "social enterprise" is not widely used, nor consistently defined. Some non-profits might be so classified, perhaps others would not. "non-profit" and "tax exempt" are both terms with defined legal meanings and legal consequences. I think that "social enterprise" is more a term to be used in sociology.

Answer 2

"Social enterprise" is not a term with a well defined legal meaning (at least in U.S. law).

A similar concept that is legally well defined is a "benefit corporation" or a "public benefit corporation", which is a particular type of entity organization (not a functional test) related to how a generically formed entity operates:

In the United States, a benefit corporation (or in several jurisdictions including Delaware, a public-benefit corporation or PBC) is a kind of for-profit corporate entity, authorized by 35 U.S. states and the District of Columbia, that includes positive impact on society, workers, the community and the environment in addition to profit as its legally defined goals, in that the definition of "best interest of the corporation" is specified to include those impacts. Laws concerning conventional corporations (referred to as "C corporations" by the IRS) typically do not specify the definition of "best interest of the corporation", which has led to the interpretation that increasing shareholder value (profits and/or share price) is the only overarching or compelling interest of a corporation. Benefit corporations may not differ much from traditional C corporations. A C corporation may change to a B corporation merely by stating in its approved corporate bylaws that it is a benefit corporation; however in certain jurisdictions (especially Delaware), the terms "public benefit corporation" or "PBC" are also required to be in the legal name of B corporations.