Co-op Law
Resources for Worker Cooperatives
Co-op Law
Resources for Worker Cooperatives

Are We Ready to Form a Cooperative?

If you’re reading this section, you’ve likely reviewed the basics about how a co-op functions, the type of cooperative that might best-fit your vision, the seven cooperative principles, and the type of legal entity that will best support the needs of your future cooperative. And now you’re almost ready to start your co-op!

In America,  we are taught to think individualistically, especially within a business environment. For American workers, thinking and making decisions collectively is a mindset and skillset that require ongoing training and commitment. Here are a  few key considerations when forming a worker cooperative, which we feel are critical to review before formation, to make sure those involved in the formation are clear on the vision and meaning of a worker cooperative.

A checklist to measure your readiness

Worker ownership can be a successful business model in nearly any industry. But, it is not for everyone and there are some important considerations to think about when deciding whether a worker-cooperative model is right for you. A fundamental aspect of worker cooperatives is balancing the entrepreneurial and independent spirit needed to start and run a new business with an appreciation for and commitment to the values of shared ownership. The essence of democratic control is that no one person has the final say. 

To begin it is highly recommended that you have done your due diligence by reading Co-ops 101. If you’re familiar with the different roles people play in a co-op, how money flows through a cooperative, and the differences between legal entity and tax structure, you may be ready to start a co-op.

To further check your readiness, here is a non-exhausted list the US Federation of Worker Cooperatives created that includes factors developed to help people like you determine whether worker ownership is the right path for you: 

  • You have people that are willing to be members, and have a clear commitment to and understanding of worker-ownership and cooperative principles. While also having the technical knowledge needed for your cooperative to be successful. These people usually form what is later called a Steering committee.
 
  • Your prospective members provide a product or service that has a real market need; you have a viable business concept.
 
  • You’ve begun to identify potential funding sources. Including meaningful capital contributions from members, in the form of cash, labor, or both.
 
  • Your cooperative chooses and trains a team of quality managers. These managers can be hired from outside or trained from within the cooperative. They don’t have to be experts with advanced degrees, like MBAs, but they should know the business well and understand the surroundings in which it operates.
 
  • You provide your prospective members with the tools and environment necessary to succeed.
 
  • You have placed an emphasis on electing experienced directors with a clear commitment to building a fiscally sound organization and working on behalf of the membership overall.
 
  • You are creating a cooperative that has the ability to actively and strategically prepare itself for changes in how it operates, the markets it serves, and the needs of its members. It can take proactive measures to adapt and stay ahead of these changes.
 

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Legal Entities

When formed as a specific legal entity, cooperatives are able to legally enter into contracts and operate as a business. California recognizes several types of

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