Formation Steps

Review the presentation to learn about the process of starting a new cooperative enterprise.

Common Formation Steps for New Cooperatives: 

  • Identify the group’s general purpose(s)
  • Identify start-up members and initial leaders
  • Review unique aspects of cooperative business model to ensure that co-op is the correct model for your needs
  • Determine if group likely meets basic cooperative success conditions: identified common needs, identified critical needs.
  • Have a likely acceptable mission/purpose for all members
  • Begin development of a business plan and financial model for the cooperative
  • Answer basic by-law questions and develop cooperative bylaws
  • Ensure that steering committee and potential members have a thorough understanding of their roles and responsibilities in the cooperative
  • Ensure that steering committee and members have a thorough understanding of capitalization strategies for the business start
  • Review requirements for membership and develop appropriate forms, which should include a membership application and member certificate. These documents may also include a member marketing agreement.
  • Review legal considerations for starting the business and requirements for incorporation of the business.
  • Name and incorporate the cooperative, checking name availability on the Secretary of State website
  • File Articles of Incorporation with respective Secretary of State
  • Ensure that the steering committee has an understanding of the tax treatment of cooperatives
  • File for Employer Identification Number (EIN) for tax identification purposes
  • Set-up checking account and necessary depository accounts
  • Determine training/staffing needs and solutions
  • Raise capital for the start-up and beginning operations of the business, exploring various funding resources for the business including member equity, grants, and debt options
  • Set-up cooperative member website
  • Host the first annual meeting of the cooperative to formally elect the first permanent board of directors, formally accept memberships, and adopt bylaws. Ensure that appropriate documentation has been signed, provided to members, and/or returned to the cooperative
  • Hold director training for newly elected permanent board
  • Continue operations supported by continued strategic planning
The following figures, from the U.S. Department of Agriculture publication “How to Start a Cooperative,” detail the cooperative development process.

Wadsworth, 2015, p. 6.

Wadsworth, 2015, p. 7.

References 

Wadsworth, J. (2015). “How to Start a Cooperative.” U.S. Department of Agriculture Rural Development Business and Cooperative Programs Cooperative Information Report 7.  Washington, D.C.: U.S. Government Printing Office.