How to start a co-operative

17Aug 2015

How to start a Co-operative from scratch

This is the first post in a series to educate and inform the average layman on how to start a co-operative (co-op) company.

As we are located in the Province of Ontario, Canada, we will demonstrate the process in accordance with our local regulations.

Your area will be under different regulations and we suggest you Google like we did: “co-operative associations company regulations Ontario” or visit the International Co-operative Alliance here: International Co-operative Alliance

Our local regulations are here:

Starting an Ontario Co-operative

From the text on the page

“There are number of critical steps to follow if you are interested in forming a co-operative. You may already have a core group of people with whom you are working. You may already be a business but would like to convert to a co-operative structure. Perhaps you are not sure what kind of business structure you want.

On Co-op has created Guide to Starting a Co-op, which provides a general overview of the co-op development process that can help you explore the steps required to plan, develop, incorporate and launch your co-operative. This guide can be downloaded at the top right of this page. Some of the text in this section is based on information from the Co-operatives Secretariat and the BC Co-operative Association.”

The legal and domain name for our co-operative will be called: Green-Protocol.coop

We chose to use the domain name as our legal name because it provides unique legal name and provides marketing at the same time.

We then found that the Financial Services Commission of Ontario is where we need to register:

Fincancial Services Commission Ontario

We needed to read information on the type of co-op to register, how to fund the co-op, what is required, etc.

For people in Ontario wishing to register and incorporate an Co-operative, here is the complete pdf from the Financial Services Commission of Ontario. Registering a Co-operative in Ontario

What type of financing should you consider

In accordance with the pdf suggested, we will choose to start a Co-op and finance it through equity. This means that we can sell shares (to future members) and put their membership fee towards the financing of the co-operative, the equipment, community projects. This step is an important decision at the start as we will need to incorporate the Co-operative with share capital. (page 7 of this Incorporating info).

We chose to use membership share to raise equity. Membership Shares (page 8). A person becomes a member of the co-operative after paying $1,000.00 to the Co-op.

The funds will be used to finance community projects and activities based on sustainability and the member will have a return on their investment through dividends paid to it’s members.

The Green-Protocol.coop business plan is to source local companies that are trying to commercialize sustainability products and services centered on community involvement. Staff and members of Green-Protocol.coop would source, investigate and recommend products, services or projects that are in the best interest of Green-Protocol.coop members.

The co-op can also require members to use some or all of their patronage returns to buy more shares. By doing so, the co-op can ensure that its equity grows each year, provided of course that the co-op has earned enough to pay patronage returns in the first place. Another way for the co-op to use its own earnings to increase its equity is to pay out dividends in the form of shares rather than cash. Dividends paid out in the form of shares are called stock dividends. Stock dividends allow the co-op to pay dividends and add to its equity capital at the same time. Members may find stock dividends more appealing than other investors.

For more information about co-operatives in your area, contact your local Chamber of Commerce or use Google to find your area association or legal agency.

In the next post we will share with you: what are Articles of incorporation, where to register, the fees, etc.