The definition of social enterprise that is applied for the purposes of this document is the definition used by the Government

"A social enterprise is a business with primarily social objectives whose surpluses are principally reinvested for that purpose in the business or in the community, rather than being driven by the need to maximise profit for shareholders and owners.

Social enterprises are diverse. They include local community enterprises, social firms, mutual organizations such as co-operatives and large-scale organisations operating nationally or internationally. There is no single legal model for social enterprise. They include companies limited by guarantee, industrial and provident societies and companies limited by shares; some organisations are unincorporated and others are registered charities."

Social Enterprise: A Strategy for Success, DTI July 2002

This Government definition is supported by the Social Enterprise Coalition (SEC), whose view is that a social enterprise is not defined by its legal status but by its nature: its social aims and outcomes, the basis on which its social mission is embedded in it's structure and governance, and the way it uses the profits it generates through its trading activities. To help understand how social enterprises operate, it is helpful to outline the common characteristics that social enterprises display:

• Enterprise Orientation – they are directly involved in producing goods or providing services to a market.
• Social Aims – they have explicit social aims such as job creation, training or the provision of local services.  They have ethical values including a commitment to local capacity building. Their profits are principally reinvested to achieve their social objectives. Increasingly social enterprises measure their social impact.
• Social Ownership – they are autonomous organisations whose governance and ownership structures are normally based on participation by stakeholder groups (eg employees, users, clients, local community groups and social investors) or by trustees or directors who control the enterprise on behalf of a wider group of stakeholders.  They are accountable to their stakeholders and the wider community for their social, environmental and economic impact.  Profits can be distributed as profit sharing to stakeholders or used for the benefit of the community.