What is the difference between a social enterprise and a charity?

Very often people do get confused by social enterprises and charities. Even though they may seem similar in nature, there are clear and obvious distinctions. For a non-profit organisation to be called a charity, it has to apply for charity status. For the sake of this article, we will use charity and non-profit organisations to refer to one group as a whole which encompasses both charities and non-profit organisations.

Company type:

A social enterprise is a typical company. Thus it would be either an Exempt Private Company Limited by Shares or a Private Company Limited by Shares.

A charity is a non-profit organisation. The usual company type would be Public Company Limited by Guarantee.

A social enterprise has a share capital structure and the debts and liabilities of the company are separate from the assets and liabilities of its shareholders or officers. A charity or non-profit organisation which is a Public Company Limited by Guarantee does not have a share capital and thus does not have shareholders. Instead, it has members who guarantee a certain amount to the debts of the company. This guarantee is usually set at SGD$1.

Private and Public:

Only a company with a share structure can be a private company. A social enterprise can be a private company whereas a charity or non-profit organisation is a public company. Because of its public company status, it will be subject to the relevant audit requirements.

Funding:

A social enterprise uses the revenue it generates from its business to fund its activities. A charity or non-profit organisation relies on external funding in the form of donations to fund its activities.

Taxes:

Both social enterprises and non-profit organisations, being both typical companies, are still subject to corporate taxes in Singapore. However, if a non-profit organisation obtains charity status, it will be granted full tax exemption.

If you are looking to start a social enterprise or non-profit organisation, do look for an experienced corporate secretarial firm like us to assist you with this matter.

When in doubt, seek legal advice or consult an experienced ACRA Filing Agent.

Yours Sincerely,
The editorial team at Singapore Secretary Services

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