Is a cooperative business the right structure for you?

When forming a business, you have numerous choices for the structure of your venture. Depending on your goals and the industry in which you work, you may find that a corporation, LLC, partnership or even a sole proprietorship is in your best interest. Each of these has its advantages and disadvantages.

However, what if you discover that many others in your community have the same passion as you and the same desire to use the business to benefit the community? You may wish to consider whether a cooperative business, or co-op, is the right fit for you. While it may seem an unconventional kind of business structure, you may be surprised at how versatile it can be and how common it is becoming.

How does a co-op work?

A co-op is a business organization that is organized and operated by people who have a common need and who partner together in a jointly-owned enterprise that is democratically run. Every member of the organization has an equal say in the management and running of the business. They also typically share equally in the profits. While there are numerous kinds of co-ops, from worker co-ops to housing co-ops, according to the National Business Cooperative Association, a business co-op must have the following factors:

  • Membership that is voluntary and open to all without discrimination
  • A democratic system of control in which all members have a say
  • Equal financial contributions from each member
  • Independence from outside control, accepting government or financial assistance only if the co-op maintains its autonomy
  • Access for members to training and education to allow them to participate fully in the business operations
  • A focus on the sustainability and financial well-being of the community
  • Collaboration and cooperation with other co-ops, locally, nationally and internationally

Of course, the co-op is also a business, so making a profit is important too. This is where legal assistance can be invaluable, since maintaining the business’ financial stability while sharing profits among co-op members can be a delicate and complex matter.

Co-op is not for everyone

Not every industry lends itself to a cooperative model. You may already know of co-op housing, grocery stores and agriculture. Your credit union is a kind of co-op, and you may be seeing educational co-ops cropping up in Washington. Some local cooperatives are New Moon Café, Orca Books, and the Olympia Food Co-op. Some hesitate to establish a co-op because of the challenges with finding investors or other financing and the complexities involved in the decision-making process involving so many members.

Nevertheless, the advantages of a cooperative business may be just the kind of venture you are looking for. Undoubtedly, you will be able to find like-minded people who share your vision. We like to collaborate with the Northwest Cooperative Development Center which is a remarkable resource for navigating cooperative models in the Pacific Northwest.

If you are interested in exploring a cooperative business model, we encourage you to contact Jensen Milner | Cap City Law. Our experienced and collaborative attorneys are well versed in cooperative business models and would be happy to explore the process with you.