Chapter 2: Developing Your Cooperative
IN THIS LESSON
The joy and challenge of cooperatives is that you can design the structure that works best for your community.
On this page, you will learn about some options for cooperative membership and structure that can inform your decisions as you begin to co-create your cooperative.
What is co-op membership?
The membership of a cooperative is anyone who shares in its ownership, control, and benefits.
Regardless of the type of cooperative you form, you will have to decide who is a member. Delineating membership is important because it will determine who can participate in decision-making for your cooperative and who will access its benefits.
Membership will be decided in part by the type of cooperative you choose. For example, a housing cooperative’s members are residents and a worker cooperative’s members are its workers. However, you may choose to create a multi-stakeholder cooperative, where multiple groups of people can become members. For example, you may be developing a grocery store, where both employees and customers can become members.
Switchgrass Spirits Membership Structure
Switchgrass Spirits currently has different membership classes to account for the initial equity and labor that the founders and investors contributed to the business. However, over time, founders and investors will sell the company to sustaining worker-owners.
Becoming a Member
Now that you have decided what groups of people can be members of your cooperative, you need to decide how someone becomes a member.
In some worker-cooperatives, a worker may only be eligible to become a worker-owner after six months or a year. They do not receive a share of the profits during this time but may be able to participate in decision-making.
Many cooperatives require a financial and/or time investment in the business. On the next page, we have listed some of the potential membership requirements. These can be combined in any number of ways to create a membership path.
“It’s the founders’ job to create and manage the company. It’s the sustainers’ job to run the company on a day-to-day basis. Eventually...the company buys itself...The founders and the investors will get bought out...and then the sustainers will own 100% of it. ... Eventually it will be sold to the workers.
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“It’s a direct path to ownership through us. You can come work for Pure Vibes. During the period in which you work for Pure Vibes, you can make the decision to become a voluntary member of the co-op. Once you do that, you’re placed on this probationary period. There is a capital contribution that has to be met. We didn’t want money to be a barrier, so half has to be met in physical dollars, and the other one can be met in hours.
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How is a co-op structured?
Cooperative organizational structures areas varied as the types of cooperatives. In this section, we will describe a few models of organizational structure, but encourage you to explore the wide range of structures out there or create one that’s suited to your unique needs.
The structure you choose will be informed in part by the number of members in your cooperative. Some structures scale better than others. It will also be influenced by your group's comfort with delegation and/or division of responsibilities. Any structure can be chosen as long as it is decided upon by all members and can be collectively changed by them at any time.
Collective
This is one of the most basic cooperative structures. Every member is involved in every major decision. Members may choose to delegate certain tasks to individual members, but decisions that impact everyone are decided by every member. This model works better with small organizations where there is more time and less division of labor.
Circles
In this structure, the organization is divided into circles based on responsibilities. Each circle has sole authority over its defined domain. For example, in a worker-owned cafe, the bakery circle would have sole decision-making over the types of pastries offered while the front-of-house staff would have sole decision-making over the procedure for taking orders. Some circle-based structures will have a central decision-making circle for strategic decisions. Circle-based structures emphasize flow and connection between different domains.
Board Structure
In this structure, all members of the cooperative elect a Board of Directors. This Board of Directors makes all strategic decisions for the cooperative, including hiring a management structure. The management structure then manages the day-to-day work. Members are not directly involved in decisions but have the power to determine who is on the Board of Directors. This organizational structure works for large organizations as several thousand members can vote for a Board of five to thirteen people that make decisions.
In Missouri, you can pick any one of a number of legal structures from a 501(c)(3) to an LLC, depending on how your cooperative will operate and what your needs are.
Your legal structure does not have to correlate with the organizational structure you choose. You could have a collective structure that legally functions as an LLC.
Work with a lawyer to match your organizational structure and immediate context to the legal structure that meets your needs.
“You can do a worker co-op as pretty much any legal entity.”
Organizational Structure vs Legal Structure
“Currently, we are an LLC, and it’s just because it works for cooperatives. We will probably be changing that structure in the near future. There has been talk about the corporation model because we are trying to qualify for sub-chapter T in terms of tax credits and things of that nature.”
“We’re an LLC with a heavy, heavy operating agreement.”
Who might end up being a member of your cooperative and how will you structures yourselves?
Download the worksheets and brainstorm with your community.