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Reasons to start a cooperative

These are reasons to start a Cooperative as well as reasons to think twice about it. [1]

Reasons Why You Might Want to Start a Co-op

  • Cooperatives exist to meet their members’ needs. Their focus is on service to members, not on bringing a return to investors.
  • Cooperatives have access to special treatment under US Tax Code that provides them with advantages not typically available to investor-owned corporations.
  • Cooperatives are owned and controlled by their members. They help keep resources in the members’ community and are guided by 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.
  • Cooperatives contribute to the economic stability of their communities.
  • Distribute the benefits of real ownership based on time and use, not just the amount of money someone can invest.

Reasons Why You Might Want to Think Twice Before Starting a Coop

  • Cooperatives may experience greater difficulty gaining access to capital because of the limitations imposed on non-participating investors, who may expect a seat on the board or specific apportionment of profits in ways that the cooperative structure makes difficult or even impossible.
  • Cooperatives need to invest time and money in supporting their democratic process, such as educating members about key issues, holding meetings, and responding to member concerns, all of which can be expensive and time consuming.
  • There may be legal limits to the scope of operations or membership for a cooperative if formed under a particular body of cooperative law (although this is typically a minor impediment, because a business is generally able to function as a cooperative without relying on a cooperative statute).
  • Cooperatives are only as good as their members ask them to be. When members stop investing time and energy, cooperatives can reduce the benefits they provide to their members.
  • Worker cooperatives in particular may struggle to engage their worker-owners and keep them engaged, because not everyone who works wants to be a co-owner of a business.

See Also

References

  1. "How to Start a Co-op" packet. http://www.cdi.coop/CDIcompletestart-uppkt2010.pdf