Why start a co-operative?

March 20, 2014 - TAGS: Social enterprise, Startup

If you are thinking about starting a business, a fundamental question is what type of business structure is the best fit — public or private corporations, co-operative corporations, sole proprietorship or partnership? As an entrepreneur, a co-operative structure might be the right business model for you.

What makes a co-operative different from a conventional business?

  1. Members or shareholders: Co-ops are structured to meet the common needs and expectations of their members, whereas most investor-owned businesses exist to maximize profit for shareholders. Depending on the structure of the co-operative, they often take broader stakeholder concerns into account, including those of employees, customers, producers, the local community and in some cases, the environment. 
  2. Ownership and control structure: Co-ops are owned and controlled by the users (members) of the co-ops; decision making is based on one-member, one-vote, not one-vote-per-share. 
  3. Allocation of profit: Co-operatives share profits among their members on the basis of how much they use the organization, not on how many shares they hold. 

A co-operative is an alternative business model that lets people collectively ‘do it for themselves' — whether it's responding to a market opportunity or meeting an identified need that neither the market nor the public sector fulfils. It engages people in their own solutions and enables members to share the risks and development costs of the business. Co-operatives are democratically owned and run, giving members real control over the direction of their enterprise and enabling them to contribute to the success of the business. This business model pools the resources, knowledge, skills, expertise, and capital of its members, while offering support.

A co-operative is a business, so setting up a co-operative is like setting up any other business — you need a market, products/services, labour force, financing and (usually) premises. Should you choose to pursue the co-operative route, there are 4 different types of co-operatives to consider.

Worker co-operatives
In worker co-operatives, the creativity and commitment of employees can be galvanized in ways they cannot be in many other businesses. In this type of co-op, employees are the members and owners of the enterprise.

Consumer co-operatives
Consumer co-operatives are established to provide products or services to their members. These businesses can serve the needs of their members in areas such as housing, health care, child care, and retail.

Producer co-operatives
Producer co-operatives process and market the goods and services produced by their members. They also supply products or services needed for members to conduct their professional activities. Examples include: independent entrepreneurs, farmers, and artisans.

Multi-stakeholder co-operatives
These serve the needs of different stakeholders such as employees, clients and other interested individuals and organizations.

If the co-operative route is for you, Industry Canada can help you create and maintain a federally incorporated co-operative. Other useful resources include Co-operatives and Mutuals Canada and our co-operatives page.


Comments

Posted by Peter on May 9, 2014
It would be appreciated if you changed your initial paragraph to reflect the fact that there are actually Private Shareholder corporations, Co-operative Corporations and NP Corporations. They are all Corporations in addition to sole proprietorship and partnership. We are trying to break the misunderstanding that 'corporation' is the standard and we are the alternative. Co-ops are limited liability corporations.
thank you.
p.
Posted by Canada Business Network on May 12, 2014
Hello Peter,

Thank you for your post. The blog, which was provided by the Co-operatives Policy unit of Industry Canada, uses plain language so the reader can learn about the unique business structure of co-operatives. We modified the blog to provide a more overarching description of corporations. The Canada Revenue Agency also provides more information on the different types of corporations found here

Hope this helps.

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