2012: International Year of Cooperatives
Are you starting a business and trying to decide on the business model that is right for you? You may be weighing the pros and cons of traditional business models such as sole proprietorships, partnerships, and corporations, but you may also want to consider starting a cooperative.
Cooperatives are owned by an association of individual members who work together toward common goals, and could be a good fit if you want to work with others to pool your resources, experience, and expertise. The cooperative ownership structure is based on democratic decision-making (one member, one vote), so every member has a vested interest in taking part in the management of the business.
Most cooperatives are formed when individuals decide to work together to meet needs that may not be available or affordable in the marketplace. You may want to consider forming one of these types of common cooperatives:
- Producer cooperatives — producers (such as farmers or artisans) work together to process, market, and distribute their products
- Consumer cooperatives — customers purchase shares in the business, resulting in lower prices or increased access to goods and services
- Worker cooperatives — employees own and manage the company, giving them control over their working conditions
Like any business structure, the cooperative model comes with unique advantages and challenges. You'll need to carefully consider the pros and cons of forming a cooperative.
Some advantages of cooperative ownership:
- Control of the business is in the hands of the people who use its product and services
- Pooled resources can be used to market products and services and increase distribution channels
- Members bring diverse ideas and solutions that can strengthen decision-making
- Limited liability means you will not be personally responsible for the debts, obligations, or actions of your cooperative
Some disadvantages of cooperative ownership:
- The democratic nature of cooperatives can slow down decision-making
- Conflict between members can be disruptive
- Extensive record keeping is required
The Canadian Co-operative Association offers advisory services that can help you get started or manage a cooperative. Industry Canada's Create / Maintain a Cooperative page has information on the requirements for starting and running a cooperative business.
Visit the Canadian International Year of Co-operatives page to access resources and find out about upcoming events. Our Corporation, partnership, or sole proprietorship? page has information about cooperatives and other business structures and can help you find the business model that is right for you.