Many social enterprises are set up as companies limited by guarantee.  These operate in a very similar way to share companies.  The main difference is that a company limited by guarantee cannot pay dividends as there are no shareholders.  Also, on winding up, any assets remaining in a company limited by guarantee are usually transferred to another similar organisation rather than to shareholders.

The main reason for setting up a company limited by guarantee is that grant funders and donors may insist on only providing funds to such a company.  Fund providers often do not want their funds to be paid out to shareholders as dividends.  Charities cannot be set up as shares companies, and therefore must be limited by guarantee if they are a limited company.

As described in the small company pages, directors are often paid a relatively small salary which is topped up by dividends.  This arrangement cannot be made in a company limited by guarantee.  This is a very big disadvantage to setting up a company limited by guarantee, particularly if the members of the company are also the directors and need to be paid a modest living for their efforts in the company.