The legal and governance structure in social entrepreneurship refers to how social enterprises are legally organized and governed so that they can both operate as businesses and safeguard their primary social purpose within different national frameworks.
The legal structure includes the choice of legal form and the rules for use and distribution of surplus, while governance refers to inclusive and responsible leadership that ensures social goals, stakeholder participation, and transparent reporting actually guide the organization over time.
The EU report on “social enterprises and their ecosystems in Europe” highlights precisely these tensions as central to future policy development: how to support growth and professionalization without losing the social and democratic core. https://base.socioeco.org/docs/social_enterprises_and_their_ecosystems_in_europe._comparative_synthesis_report.pdf
We also refer to the report Social Economy in Europe to underline the importance of social entrepreneurship and its role in European developments. https://www.oecd.org/content/dam/oecd/en/publications/reports/2025/12/social-economy-in-europe_2599a910/3432de93-en.pdf
Problem statement
There are many questions connected with establishing and running a social entrepreneurship. One very important question is:
In what ways can the choice of legal form and governance model (legal and governance structure) both support economic sustainability and safeguard the social mission in a social enterprise?
Lessons from rural social entrepreneurs
Choice of legal form
Rural social entrepreneurs must adapt to existing company forms, and the chosen structure should be clearly linked to the social mission, not only to tax and support schemes. Different countries have different definitions and legal forms for social enterprises, which creates uncertainty both for actors operating across borders and for the EU level that seeks to support the ecosystem.
Governance and the double bottom line
Sound governance is crucial to prevent mission drift, that is, gradually moving away from the original purpose and values, especially in small and vulnerable organizations. It is important to focus on social impact while at the same time maintaining economically balanced operations.
Inclusive local governance
Service users, local communities, employees, and volunteers should have real influence in governance in order to ensure local legitimacy and a strong sense of place.
Simple and transparent structures
Small organizations need few and clear documents and roles, with governance systems that are practically manageable without extensive expert capacity.
“Fit” with support systems
The legal and governance structure should mirror how the organization will collaborate with the municipality, welfare agencies, and entrepreneurial support since the choice of form affects access to grants, contracts, and partnerships. In other words, it is important to organize the enterprise so that it is eligible for support from different actors. This often means that a hybrid organizational model should be considered.
