Step by step
Step by step to a social enterprise
Generally speaking, the essence of starting a social enterprise comprises of a good idea and its realisation. However, to achieve your goal, establish a social enterprise and get a competitive position and “visibility” in the market, you should thoroughly go through all the stages, and this tutorial might help.
There are several ways to start a social enterprise, which is still a novelty to the legal system in Serbia. Practical examples show that social enterprises, depending on the type of activity performed, have mostly opted for one of three legal forms:
3. limited liability companies.
The comparative review of the main characteristics of the three provides you, the future social entrepreneurs, with an opportunity to choose the most appropriate form of work.
It seems that the easiest part is to establish a social enterprise, and the biggest problem is to sustain and develop the business and to be competitive in the market, which is still quite unstable, and at the same time to preserve the social component of business. For that reason, it is necessary to conceive a good idea and gather the right people to start a social enterprise.
Regardless of the type of enterprise you choose, our suggestion is to start the business with partners with whom you will associate knowledge and skills, which will be of great help at the beginning. It is also important to regulate all duties and responsibilities with a contract, in order to avoid unpleasant situations in the future.
The next step, once you have conceived a good idea and gathered trustful associates, is to start researching competition and potential demand of your future product through a survey. According to the obtained data, make changes in your current business plan and start with your activities.
Before you decide to start a social enterprise it is very important to choose an appropriate legal form, which will meet all your needs and goals.
If you are not sure what type of social enterprise to choose, we have prepared a brief overview of the three most common types of social enterprises in Serbia:
3. limited liability company.
Cooperative is a form of organisation of individuals in which they, by operating in the corporate principles of voluntariness and solidarity, democracy, economic participation, equal management rights, independence, cooperative education and inter-cooperative collaboration, realise their economic, social and cultural interests. Cooperative is managed by its members, and they are all equal in management.
Depending on their goals and the necessary funds for their establishment and operation, cooperatives can be established and operated with or without equity shares in accordance with the founding act and cooperative rules.
Cooperative ownership is formed from the shares of its members which have been transferred to the ownership of the cooperative or its membership fees, funds generated from the cooperative’s operations and business and the cooperative's assets acquired in other ways. The tax rate on corporate profit is proportional and uniform, and is 10%.
2. Limited liability company
Limited liability company is established by legal entities and/or individuals, in order to do business for profit. Member of a limited liability company acquires a share in the capital of the company in proportion to the share value.
Voting rights of members and property rights are proportionate to shares of members in total paid-in capital of the company at the time these rights are exercised.
Company Assembly decides on the allocation of the profit and it is done in proportion to the capital stock. The tax rate on corporate profit is proportional and uniform, and is 10%.
Association is established for the purpose of implementation or improvement of any joint or common goal or interest, which is not prohibited by the Constitution or by law, and may be established by at least three individuals or legal entities.
To establish an association no founding assets are required. Mandatory bodies of the association are the assembly and association representative. Members of the association manage it directly or through their elected representatives in the association bodies. Association is responsible for its obligations with its entire property. Members of the association and the association's bodies are not liable for obligations of the association in the legal transactions of its assets.
In accordance with the principle of prohibition of profit distributions, as one of the key features of the non-profit entities, the association cannot distribute the profit generated from the business or other activity to its founders, members, members of the association’s bodies, directors, employees, or persons associated with them.
If it is engaged in economic activity directly, under certain conditions, it has the right to tax exemption, and if it does not meet the requirements, it is subject to payment of the general tax rate on corporate profit of 10%.
It is often thought that a lot of paperwork is needed to establish a social enterprise. However, if you have clear and precise information, you will see that the process is not that complicated.
Registration of a social enterprise is legally binding and indicates the beginning of your responsibility to the state and society. Therefore, here is the most important information on the establishment of each social enterprise individually.
Registration varies depending on the type of social enterprise you want to establish, but there are certain obligations identical for all three types, and they are as follows:
- file a registration form;
- obtain an APR decision (tax identification number and registration number);
- have a stamp;
- open an account.
The acts necessary for the establishment of a cooperative are the founding act, cooperative rules, minutes of the founding assembly. The Law on Cooperatives does not prescribe specific requirements on the amount of the minimum capital.
For cooperatives, the following is envisaged by law:
- 1. Regular cooperative audit conducted every other year;
- 2. Extraordinary audit – upon the decision of the cooperative bodies, or at the request of the cooperative association, state authorities, or a certain number of cooperative members, determined by the cooperative rules.
2. Limited liability company
For the establishment of a limited liability company a founding act should be submitted, but in a situation where there is more than one founder, it is advisable to make a contract with company members, which would more closely regulate the relations within the company./p>
To establish an association, it is necessary for the founders to hold the founding assembly where the founding act and the statutes will be adopted, and a person authorised to represent the association elected. The association is obliged to create minutes of the founding assembly about the content of the activities, which will among other things be submitted as an annex to the application for registration in the Register of Associations.