What Is A Cooperative Business?
A cooperative business is one where a group of people have a common goal that they want to meet and they do this by forming a cooperative business entity. The group that is forming the business are called the members. While this type of business has many similarities to the common types of businesses that we are most aware of there are some differences.
It doesn’t matter how much each member contributes moneywise to the business each member has one vote.
The purpose of the cooperative business has to be to meet a common need of all of the members and the main purpose is not to maximize profits.
There has to be a board of directors, but the board must be made up of two thirds of the members. These members are elected at a general meeting.
Any surplus profit is usually going into the organizations reserved.
There are a lot of reasons why a group of people may want to start a cooperative business. It may be that they have an idea where they can perform a service that other businesses are not offering. It may be to support their local community. A good example of this is if a small community has a large business entity that is going to close down. This means that many of the workers within the community will no longer have a job. There is a possibility that a group of people within the community could get together and form a cooperative entity to buy that business out in order to keep it alive within the community. This is often done to keep the profits and the control of a specific business within the community where it originates. In other cases this type of cooperative business is taken place when the employees wish to buy out the business owner where they are employed.
There is a lot more to set up a cooperative business with a lot more regulations. You will have the choice to either set up your cooperative on a federal or provincial level. If you are only going to operate the business in Ontario then you would set up a provincial Corporation however, if you are going to go outside of the province then you want a federal corporation. Looking at the provincial Corporation the first three steps that you would have to take is first to do a name search for your new business. Then you need to fill out the proper forms and documents for the financial services commission of Ontario you will need their approval before you can start your business. You may find that your business is going to require different types of licenses and permits depending on which type of corporation you’re doing.
Ideally you will want to assign a small group to do all of the research that is needed to set your business up properly and get the professional help that you will need to go through the entire process. A good example of a co-op would be something like the credit union. When it comes to financing the co-op most often the majority of the money comes from the members that are forming it, but there are other types of potential financing that may be available through government grants and financing.