Starting a Cooperative
Phil Kenkel
Bill Fitzwater Endowed Cooperative
Chair
Cooperatives are user-owned, usercontrolled, and the benefits return to the
users. So your first job is to decide who
are the members and what benefits do
they want from this cooperative.
Reasons to Start a Co-op
Cooperatives exist to meet their
member’s needs. Their focus is on
service to members not on bringing a
return to their investors. Cooperative
members are not penalized for working
together in a cooperative business under
US Tax Code, therefore many
cooperatives enjoy tax advantages.
Cooperatives are owned and controlled
by their members. They help keep
resources in the members’ community
and are guided by the members’ values.
Decisions made democratically by the
membership provide a strong direction
that is supported across the organization.
Profits are returned to members so
members benefit from the business they
do with the cooperative.
Legal Structures
There are two paths to becoming a coop: Incorporate under a co-op statue in
any state or incorporate as a corporation
and adopt cooperative by-laws. Limited
Liability Corporations (LLCs) also
operate cooperatively but are not
technically cooperatives.
The Co-op Development Process
Timeline required is a minimum of 40
hours of board meetings and 12-18
months. Resources needed include
dynamic, future-thinking, risk taking
Leadership, Cooperative business, legal
and financial specialists. Along with
member equity investment and start-up
financing.
General Guidelines for Success
Keep members informed and involved to
help build strong member leadership that
are willing to be committed. Set realistic
goals and assumptions, and base
decisions on market research rather than
opinion. Maintain honest open
communications and invest in your
members, board, and staff education.
Finally, establish a realistic market entry
strategy and make sure you have enough
product to sell to a large enough market
to make money.
Questions that should be considered
before talking with an attorney
1. Who are the members of this
cooperative? What needs of
theirs is the cooperative designed
to meet?
2. List the assumptions you hold
3. Identify the blocks for moving
forward.
4. List the core values/ principles
that guide the cooperative.
5. How do you want eh world to be
different because the cooperative
exists? What is the vision you
hold for this cooperative?
6. What do you want the
cooperative to accomplish? What
is its mission?