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B Corp vs CIC vs Social Enterprise: Which One Fits Your Business?

The B Corp vs CIC vs social enterprise question trips people up because the three are not the same kind of thing. A community interest company (CIC) is a legal form of company, registered at Companies House and policed by a regulator. B Corp is a certification, granted by the charity B Lab to a business of almost any legal form that passes its assessment. Social enterprise is a description, not a legal status at all: it means a business that trades mainly for a social or environmental purpose. So a business can be all three at once, and many are. This page explains what each one is, what it costs, what it locks you into, and how to choose.

What a CIC is

A community interest company is a limited company, either limited by guarantee or by shares, created for a purpose that benefits the community rather than its owners. To register one, you must satisfy the Regulator of Community Interest Companies that "a reasonable person might consider" the company's activities are for the benefit of the community: the community interest test. The company must keep meeting that test for as long as it exists.

Three features set a CIC apart from an ordinary company:

• The asset lock. A CIC's assets and profits must be used for its community purpose. If it transfers assets, it must do so at full market value or to another asset-locked body, such as another CIC or a charity.
• The dividend cap. A CIC limited by shares can pay dividends to private investors, but the regulator's guidance sets a maximum aggregate dividend cap of 35% of profits, leaving at least 65% for reinvestment or the community.
• The annual CIC report. Every year, alongside its accounts, a CIC files a community interest report (form CIC34) showing what it has done for the community and how it has involved its stakeholders.

Companies House charges £115 to register a CIC online and £139 on paper, and £45 to convert an existing limited company into a CIC. The regulator's guidance is blunt about the commitment: once registered, the only ways out are to dissolve the company or convert it to a charity. A CIC is taxed like any other company; it does not get charitable tax reliefs.

What a B Corp is

B Corp is a certification run by B Lab, a non-profit network, through B Lab UK in this country. A business earns it by meeting B Lab's standards across governance, workers, community, environment and customers, by having its evidence verified, and by changing its legal documents. In the UK that means amending the articles of association so that directors must consider the effect of their decisions on workers, communities and the environment, not only shareholders. Certification has to be renewed every three years, and B Lab is moving companies onto its new set of standards.

The fees are set by revenue. B Lab UK charges a submission fee, a verification fee and an annual certification fee; for a business turning over less than £150,000, the first year comes to £1,560 plus VAT, and a £12 million business pays £10,000. Our page on B Corp certification costs has the full table. For most small firms, the bigger cost is the staff time spent gathering evidence.

B Corp does not restrict profits or dividends, and any legal form can certify: a limited company, a partnership, a CIC or a co-operative. It is a public statement that the business has been measured and passed, and it is the one most recognisable to customers and recruits.

What a social enterprise is

There is no legal definition of a social enterprise in UK law and no register to join. The term is used for businesses that trade, rather than relying on grants and donations, mainly to achieve a social or environmental aim, and that reinvest most of their profits in that aim. A social enterprise might be a CIC, an ordinary limited company with a mission written into its articles, a co-operative, a community benefit society or a charity's trading arm.

Because anyone can use the label, it carries weight only if you can back it up. Membership bodies such as Social Enterprise UK, and accreditation schemes, exist to give the term more meaning, but none of them is a legal requirement.

Side by side

Sources: Companies House fees; CIC Regulator guidance; B Lab UK pricing, via our B Corp cost page.

How to choose

• You want to raise grants or community funding. A CIC, especially one limited by guarantee, signals to funders that the assets cannot be stripped out. Many grant-makers that do not fund ordinary companies will fund CICs.
• You want private investors and a normal exit. Stay an ordinary company and consider B Corp. The asset lock and dividend cap make a CIC hard to sell and less attractive to equity investors.
• You want a credible public badge. B Corp is externally verified and widely recognised, which matters in consumer brands, recruitment and some supply chains.
• You are just starting. Describing yourself as a social enterprise costs nothing. Write your purpose into your articles now; you can register as a CIC or certify as a B Corp later, once you know which constraints you can live with.

Whichever you pick, the label is only as good as the practice behind it. Our guides to corporate social responsibility, the shareholder and stakeholder models and stakeholder engagement cover the day-to-day side.