Anyone who wants to be the next Bill Gates or Martha Fox has a fairly straightforward path: great idea, great business plan, great profit.

Okay, so maybe straightforward isn't exactly the right word. But entrepreneurs with an eye for a big payout do not, at least, have to struggle with the same acronyms and options confronting would-be social entrepreneurs. Charity or CIC? Trust or unincorporated association? Here is a brief guide to some of the options available; more information can be found at the website of Business Link www.businesslink.gov.uk, the government-funded business assistance service.

Unincorporated associations
Usually informal; anyone involved remains personally liable for any loans and other liabilities.
Allowed to trade but cannot hold property or assets (although you could form a trust to do this).
Not regulated by Companies House or the Financial Services Authority (FSA).
Can apply for charitable status, which means that it will have to comply with the Charity Commission's regulations. www.charity-commission.gov.uk

Trusts
Can hold assets.
Do not distribute profits.
Managed by trustees on behalf of the community for which it was set up.
As with unincorporated associations, trustees are personally liable.
Run according to the social objectives set out in its trust deed.
May need to register at Companies House.
Can apply for charitable status.

Charitable social enterprise
Purposes must be wholly charitable and for the public benefit.
Any surplus must be reinvested into the charity.
Benefits from tax and rate relief.
Run by directors or trustees, who cannot be paid for this work.
Regulated by the Charity Commission in England and Wales, HM Revenue & Customs in Northern Ireland and the Office of the Scottish Charities Regulator in Scotland.
Must register with Companies House or the FSA.

Community interest companies (CIC)
Based on the same form as a limited liability company but with extra requirements; can be limited by shares or by guarantee.
CICs are regulated and must conform to a number of rules, such as not paying directors excessive salaries, demonstrating their business's social and environmental impact each year and operating transparently.
The form also restricts the way in which profits are handled, depending on exactly how the CIC is set up.
Those limited by guarantee are not-for-profit-enterprises, while those limited by shares can, under certain circumstances, distribute profits to their members.
More information can be found at www.cicregulator.gov.uk.

So how do these options work in practice?

Peter Holbrook is the chief executive of the Sunlight Development Trust [SDT], which is a charity, and Sunlight Enterprises, which is a CIC. He says that the two different forms allow entrepreneurs very different degrees of control; the founder of a charity shapes its creation but not its strategic direction, while someone who starts a CIC can steer the business as he or she sees fit.

"As a charity, SDT has trustees at the senior level of governance, which means we have community members and other stakeholders [from outside the organisation] defining our direction," Holbrook says.

"With a CIC, we [the founders] sit on the board, the staff have representatives there and we choose the direction of the business."

Social entrepreneurs who are interested in the business side of things are likely to want more control and involvement than is offered by a charity. "You can still do good without losing control," Holbrook says. "We work very hard to develop our business…Our livelihoods and our careers are down to its success and that builds a lot of motivation."

However, this is not to say that a CIC is better than a charity.

Having both allows Holbrook to maximise the amount of money raised, by running the CIC in a businesslike fashion, while giving the community a stake in how it is used: the CIC's profits are transferred to the charity, which then decides how they are spent.

Having both a charity and a CIC has other benefits as well, says Martin Kinsella, the chief executive of P3, which has both charitable and CIC arms. "It is advantageous to have more than one string to your bow," he says. The charity can apply for grant funding that will help to get projects off the ground, while the income generated by the CIC means that the organisation is not dependent on the goodwill of donors or government.