The final paper will present and explain the key principles of social entrepreneurship and possible sources of funding for social enterprises. After that, social entrepreneurship in the European union and the Republic of Croatia will be explained and analyzed in detail. For social entrepreneurship in the Republic of Croatia, the legal frameworks and legal forms of the Republic of Croatia will be specified. The purpose of the work is to make an overview of the state of social entrepreneurship in the Republic of Croatia with a comparative presentation of the state of social entrepreneurship in the European Union. Social entrepreneurship is a form of business that is driven by social goals and the creation of an exclusively positive social and environmental impact. Social entrepreneurship primarily contributes to the achievement of strategic goals, social cohesion, the fight against poverty and increased employment, the creation of new products, competitiveness, the preservation of resources, valuing heritage and improving the quality of life through business for social welfare. Social economy is an economy that expands solidarity in society. It is realized in accordance with the social mission and is never an end in itself, because a significant part of the profit is invested in the community and society, and decision-making is especially based on high demographic standards with the inclusion of all those affected by the activity.