KPMG Spark Blog

Everything Entrepreneurs Need to Know About a 'Cooperative Business Model'

Much like forming an LLC or Corporation, a cooperative business model faces many similar requirements during the filing process. However, there are also many differences due to the nature of the entity and the role its members play. Here’s a look at the similarities and differences shared in forming a cooperative.

If you run a retail, agricultural, or healthcare-related small business, you might already be familiar with the cooperative business model.

For entrepreneurs just getting started in these industries, a cooperative (sometimes referred to as a “co-op”) is an organization run by an elected board of directors that is operated to benefit those that use its services. Members of a cooperative vote to control the direction the organization goes in and whatever profits and earnings a cooperative generates are distributed among its members.

Similar to an LLC or Corporation, a cooperative needs…

  • Articles of Incorporation, which are also known as Articles of Organization. These documents are required by the state your business is filed in and includes information like the cooperative’s name, location, dates in business, purpose, and structure.
  • Bylaws, which are internal documents necessary to operate the cooperative.  Some of the topics covered in bylaws include how members are elected, how meetings and operational procedures are organized, a summary of duties, and requirements for membership.
  • Licenses and permits, which will vary depending on the state you’re in.

Unlike an LLC or Corporation, a cooperative needs…

  • A strategy. Members meet together beforehand to discuss needs the cooperative will fill and all aspects of the business plan. Every member must mutually agree upon these decisions together before proceeding forward.
  • Membership applications. Want to bring on new members for your cooperative? A membership application must be established ahead of time with necessary information including the names of members, their rights and benefits, and signatures from the board of directors.
  • A charter member meeting. The board of directors is appointed during this meeting along with discussion and voting to adopt bylaws created earlier.

Due to its niche nature, a cooperative may not be an option every entrepreneur can embrace for their business. It also faces the difficulties of appealing to investors that seek a financial return with a slower cash flow and “one member-one vote” philosophy which applies to all members regardless of how much involvement or investment they put into the cooperative.

However, a cooperative business model still has plenty of advantages to offer if you feel like it might be the best fit for your needs. The structure operates on a democracy with every member getting the right to their vote and no one vote outweighing another. It’s also inexpensive to register with members taxed only once on their income from the cooperative, and members are free to join or leave with the entity needing to file for a dissolution as a result.

 

Deborah Sweeney is the CEO of MyCorporation.com. MyCorporation is a leader in online legal filing services for entrepreneurs and businesses, providing start-up bundles that include corporation and LLC formation, registered agent, DBA, and trademark & copyright filing services. MyCorporation does all the work, making the business formation and maintenance quick and painless, so business owners can focus on what they do best. Follow her on Google+ and on Twitter @mycorporation.

Please note that KPMG Spark’s sponsorship of this blog article is not intended to address the specific circumstances of any particular individual or entity and does not constitute an endorsement of any entity or its products or services. This content represents the views of the author, and does not necessarily represent the views or professional advice of KPMG Spark.

KPMG SparkJune 29, 2017Posted In: Business Tips

KPMG Spark is an online accounting service that saves you time so you can focus on what’s most important for your business.

3 ways that having a human bookkeeper can make your life easier

Hiring a trained bookkeeper ensures that your money is being managed correctly and that nasty surprises don’t catch you off guard.

Ben AsplundJanuary 12, 2021Posted In: Business Tips

Frequently Asked Questions about KPMG Spark

Wondering what KPMG Spark is all about? Here, we have put together some of the most frequently asked questions we get at KPMG Spark to help you navigate your online bookkeeping experience.

Ben AsplundJanuary 5, 2021Posted In: Business Tips

3 Bookkeeping Leading Practices

Whether you get your bookkeeping done with a professional—as you get with us at KPMG Spark—or you do it all on your own, there are important things you can do to make it easier for you and your bookkeeper. Here, we will outline three leading practices for bookkeeping we recommend to our clients.

Ben AsplundDecember 15, 2020Posted In: Business Tips

Differences between cash and accrual accounting

Learn the differences between the cash and accrual accounting methods and see how your online bookkeeper can help you keep up on all your online accounting demands.

Ben AsplundDecember 8, 2020Posted In: Accounting Resources

The true cost of doing your own bookkeeping

The appeal of doing your own bookkeeping is perhaps obvious: not having to pay someone else to do it for you. But the important thing to consider when you are thinking about doing your own bookkeeping or outsourcing it is what you are losing from taking that time from your business.

Ben AsplundNovember 3, 2020Posted In: Business Tips

Reaching the growing millennial workforce

Stay on top of what you should know about attracting and retaining a millennial workforce, and KPMG Spark, a small business CPA firm, will help you stay on top of your online accounting and bookkeeping. This blog's author is a millennial and the content therein represents the views of the author.

Ben AsplundOctober 27, 2020Posted In: Business Tips

4 Tips on how to keep your business afloat in a challenging economy

In any kind of economic downturn, small businesses are often hit the hardest. It’s now more important than ever to be creative and find ways to make your customers happy.

Ben AsplundOctober 13, 2020Posted In: Business Tips

The 4 Stages of Startups

As an online bookkeeping company, KPMG Spark has experience to help you understand your position in the business lifecycle of a startup that just might help you stay a bit ahead of the game.

Ben AsplundOctober 6, 2020Posted In: Business Tips

How to manage your payroll

Use these tips to help manage your small business payroll and remember, KPMG Spark facilitates payroll and and offers invoicing services in addition to online accounting services.

Eric BeardenSeptember 29, 2020Posted In: Accounting Resources

Subscribe

This site is protected by reCAPTCHA and the Google Privacy Policy and Terms of Service apply.