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The paper analyses the peculiarieties of social economy, focusing the scientific attention to social enterprises and their environment in EU and, especially, Lithuania. The research problem of the paper lays upon revealing the situation and development of social entrepreneurship and social enterprises in EU and Lithuania, especially emphasizing rural areas and their peculiarities. The aim of the paper is to disclose the role of social economy and the importance of social enterprises in it, especially concentrating on the environment analysis for such business in Lithuanian rural areas. In the research paper, there were analysed social economy context and importance, legal, economic and social environment of social enterprises in Lithuanian rural area, and social enterprises in Lithuania in terms of latest statistical data. Main findings of the fulfilled research are following: social economy remains very important in EU countries, but the exposure of it is quite different in various countries. Lithuania is trying to implement the principals of social economy in the policy of the country. Now the attention is focused on social entrepreneurship and social enterprises as the unused potential for economy boost in the country. Environement analysis of social enterprises, especially focusing on rural areas of Lithuania, revealed that situation is getting better, but there are a lot of things to be improved for successful development of social business in the country. The improvement should start from public institutions and their focused activity to improve conditions for social enterprises. Otherwise, intentions from business actors are very important also. The further guidance of this research could lead to deeper analysis of social entrepreneurs' intentions due to starting up social business gathering primary data from the potential and existing entrepreneurs. Rural areas remain as unexplored area for social business creation, especially when additional financial support is planned for them

SOCIAL ECONOMY: THE POTENTIAL AND CHALLENGES OF SOCIAL ENTERPRISES IN LITHUANIA