Choosing The Right Structure For Your Social Enterprise (2025 Updated)

Contents

What Is A Social Enterprise?

Traditionally, businesses are set up to make a profit, while not-for-profits focus solely on social good. In 2025, however, a growing number of organisations are embracing a dual mission, aiming to generate both financial success and positive societal impact.

But what if you want to do both?

Social enterprises sit right in the middle of this spectrum – a dynamic group of organisations striving to create profit and social value. They blend innovative business models with a commitment to community and environmental betterment.

Starting a social enterprise is a fantastic way to drive both financial and social value, especially in today’s competitive landscape. By aligning your profit objectives with a genuine commitment to social impact, you can build a sustainable business that benefits both your bottom line and the community.

Just like with any new organisation, the first challenge is always choosing the right structure. Your decision here will set the foundation for how you grow and measure your impact.

What Is The Right Structure For A Social Enterprise?

In Australia, legal structures cater to both profit‐making corporations and not-for-profit organisations. However, there isn’t a unique legal structure labelled specifically as a “social enterprise.”

Instead, social enterprises leverage existing legal frameworks to achieve their twin objectives. Choosing the right structure is a critical first step, ensuring that your organisation’s framework aligns with your mission, growth strategy, and the financing you aim to secure.

You’ll need to ask yourself: do you want to make a profit? This fundamental question helps direct your decision-making process.

We’ll walk you through some of the most common structures for social enterprises and highlight how innovative organisations are adapting them for enhanced social impact. For additional insights on business structures, check out our Sole Trader vs Company guide.

Pty Ltd Company

Many social startups and emerging social enterprises opt for a Proprietary Limited (Pty Ltd) company structure. This is the most common framework for profit‐driven businesses, offering a familiar model to investors and clear pathways for growth.

A Pty Ltd company is a separate legal entity from its owners, meaning personal assets are generally protected from business liabilities. Investors appreciate this robust structure for its transparency and effective capital raising capabilities.

For detailed guidance on capital raising and limited liability, refer to our Company Registration Service. This structure also allows for clear distinctions between shareholders and directors, as discussed in our business structures overview.

Company Limited by Guarantee

A common option for not-for-profit endeavours is the Company Limited by Guarantee (CLG) structure. In a CLG, there are no shareholders or dividends; instead, members unite around a shared purpose that isn’t focused on profit.

This structure is particularly attractive when pursuing government grants and philanthropic donations, owing to its explicit social purpose. CLGs are regulated by ASIC unless you register as a charity – at which point reporting is handled by the Australian Charities and Not-for-profits Commission (ACNC).

If you’re considering this path, our article on how to set up a charity offers comprehensive insights into the process and benefits.

Incorporated Association

An Incorporated Association (IA) is another viable structure for not-for-profits, particularly suited to community groups and social clubs. Like a company, it is recognised as a separate legal entity, but its members’ roles are geared towards collective purpose rather than profit.

Under an IA, an elected management committee guides the organisation, and members derive influence from their collective contribution rather than dividend payouts. This structure frequently benefits from more streamlined reporting and lower administrative burdens, making it attractive for attracting grants and donations.

Each state handles IA registration differently, so it’s important to consult local guidelines. To learn more about setting up an IA, see our guide on starting an incorporated association.

The Hybrid Structure

Social enterprises often require the best of both worlds – the ability to raise capital like a traditional business and the capacity to attract grants like a not-for-profit. The Hybrid Structure is an emerging model that involves setting up a not-for-profit entity (either a CLG or IA) alongside a Pty Ltd company.

Under this model, each entity fulfils a distinct role, with a network of legal agreements ensuring robust governance and seamless operational integration. While managing two entities can be challenging, it enables your social enterprise to diversify funding sources and optimise both social impact and financial growth.

For additional guidance on managing dual structures, refer to our article on Profit Share Agreements for Business Partnerships. As regulatory environments evolve in 2025, keep an eye on updates to legal frameworks that may further support these hybrid models.

A New Legal Structure?

Across the globe, the ‘benefit corporation’ structure in the United States mandates both profit-making and social impact. Here in Australia, while there isn’t yet a dedicated legal structure for social enterprises, momentum is building for a similar framework.

For example, innovative organisations such as the crowdfunding platform Chuffed are embedding their social purpose into the shareholder agreements and constitutions of their Pty Ltd companies. Now backed by Blackbird Ventures, their model – often described as a ‘Social Benefit Company’ – demonstrates how traditional structures can be customised to protect social missions while facilitating capital growth.

Certifications

Beyond selecting the appropriate legal structure, you might also consider obtaining certifications to enhance your social enterprise’s credibility. In Australia, B-Corp certification is administered by B-Corp Australia and B-Lab, confirming your leadership in social innovation and transparency.

Globally recognised brands such as Ben & Jerry’s, Patagonia, and Etsy have earned B-Corp status, which can be a valuable asset in attracting investors, increasing community trust, and supporting the push towards more tailored legal frameworks like a Benefit Corporation model in Australia.

What To Take Away…

We’ve explored the most common legal structures for social enterprises, as well as innovative hybrid models that enable you to balance profit-making with social impact. Choosing the right framework from the outset is crucial, as it will influence your financing options, profit distribution, and decision-making processes.

Your chosen structure will also dictate your regulatory obligations, including the reporting standards set by bodies like ASIC and the ACNC. It’s important to ensure that your legal framework not only supports your current goals but also aligns with your long-term strategic vision.

If you’d like to learn more about the legal requirements for your business, take a look at our Business Structure Guide and our article on Legal Aspects of Starting a Small Business.

We understand that navigating legal structures can be overwhelming, which is why our experienced team is here to help you find the best solution for your unique social enterprise. For more information on selecting the right legal support, check out our guide on choosing a small business lawyer, or simply get in touch with us.

To discuss your options and get started with the necessary legal documentation, feel free to contact us at 1800 730 617 or team@sprintlaw.com.au.

Regie Anne Gardoce

Regie is the Legal Transformation Lead at Sprintlaw, with a law degree from UNSW. Regie has previous experience working across law firms and tech startups, and has brought these passions together in her work at Sprintlaw.