Social enterprises should think very carefully before they apply for charitable status, according to a new publication from Social Enterprise London (SEL).
A SEL survey found that 58 per cent of social enterprises in the capital are also registered charities.
Keeping it legal - legal forms for social enterprises, co-written by SEL and law firm Bates, Well and Braithwaite, says: "For social enterprises that are emerging from the voluntary sector, the question of charitable status will be of particular concern.
"On the one hand offering potential savings and the opportunity to raise additional funds and on the other placing very clear limitations on what the business can lawfully do under charity regulations."
If a social enterprise registers as a charity, it will not be able to pay profits to members but must plough them back into the organisation, the document says.