There are many roles people can play in a cooperative business. Certain roles are legally defined and have specific legal considerations when it comes to function, decision-making, tax management, and more. Clearly defining roles can provide a solid foundation for your cooperative.
Member Roles
Being a member of a cooperative comes with both rights and responsibilities outlined by either legal regulations or the cooperative’s governing documents. A pivotal aspect of being a member involves voting rights. Voting rights refers to the ability to vote in direct elections. In some cases, based on the structure of the cooperative there might be different membership classes that have distinct voting rights.
Partners
When it comes to employment law, it doesn’t apply if there’s no clear boss-employee relationship. If you work for yourself as a sole proprietor, you’re not considered your own employee. But what about when two or more people own, manage, and work for a business together? This can include different types of businesses, like partnerships, LLCs, cooperative corporations, or other corporations.
To determine if someone is considered a partner in a business, courts and labor law agencies use different tests.The Clackamas Gastroenterology Associates, P.C. v. Wells case in 2003 created guidelines for determining if a “master-servant” relationship exists, which includes:
- Whether the organization can hire or fire the individual or set the rules and regulations of the individual’s work;
- Whether and, if so, to what extent the organization supervises the individual’s work;
- Whether the individual reports to someone higher in the organization;
Whether and, if so, to what extent the individual is able to influence the organization; - Whether the parties intended that the individual be an employee, as expressed in written agreements or contracts;
- Whether the individual shares in the profits, losses, and liabilities of the organization.
Other cases, like Simpson v. Ernst & Young, identified different factors that courts consider, such as the right and duty to participate in management, exposure to liability, and investment in the firm. It’s important to note that different tests may be used and there are many factors that can be considered in determining who is a partner in a business. In a cooperative corporation, a partner is considered a member of the cooperative.
If you choose to form your business as a cooperative corporation you must have a Board of Directors and Officers.
Board of Directors
If you choose to form your business as a cooperative corporation you must have a Board of Directors and Officers.
Officers
Many or most cooperative corporation statutes require that a cooperative have at least three officers:
- President
- Secretary
- Chief financial officer
Unlike the Board, which has the ultimate governing authority over the cooperative, the officers are the executive agents who carry specific responsibilities within the cooperative. These responsibilities are generally administrative in nature. Officers may be executive managers with authority from the Board to implement company goals, or they may be figureheads who are deployed only to sign necessary documents for outside parties. The role of officers, like that of the Board, varies based on the size and complexity of the business and the company culture
Non-Member Roles
Employees
Cooperatives can have both members and employees. An employee is a non-member hired by the cooperative to do work. An employee of a cooperative is not automatically a member of the cooperative unless they have purchased membership in the cooperative or membership is a requirement for employment. Typically, employees do not have the same decision-making power that members do. Because of this, employees have certain legal protections that obligate coops to adhere to certain requirements:
- Paying minimum wage and overtime
- Complying with standards for hours and working conditions
- Withholding of payroll taxes and other withholdings
- Maintaining workers compensation insurance
- Complying with occupational safety and health laws
- Verifying eligibility to work in the U.S.
- Posting of certain kinds of notices and posters related to employees rights
- Adhering to certain record-keeping requirements
However, if someone is not an employee, most of those requirements do not apply.
Who is NOT an employee
There are four primary legal categories of workers that are not considered employees, and here are some basic explanations of what each is:
- Volunteers: People that do work for charitable, religious, or humanitarian benefit.
- Interns: People that do work for their own educational or therapeutic benefit.
- Independent Contractors: People that do work for others in an independent manner.
- Partners: People that work together as relative equals for their own and mutual benefit.
How Cooperatives Are Structured
Cooperatives are member-owned and democratically controlled businesses that distribute profits based on an equitable patronage system. Cooperatives are structured by type of cooperative, the tax status and the legal entity that is chosen by its members. The decision depends on the mission and needs of the co-op. Difference between Co-op Type, Legal Entity and Tax
How Money Flows Through a Cooperative
The way money moves from clients to the cooperative, to the worker owners and shareholders is based on the value of community wealth building. The system that keeps any value generated by individuals (such as profit, labor, etc.) within the co-op and distributed back to those individuals is called patronage. Sometimes, members are even called
The Member Role in a Cooperative
Understanding the Member Role in a Cooperative In a cooperative, a member is defined by specific legal rights that include ownership and the ability to vote for leadership. There can be different classes of membership and different roles that members can play, and there may be specific rules and processes that apply to each group.
