Ontario's Business Structures- which one is right for you? Part 4 - Cooperatives.
We will be concluding our current series on Business Structures with an interesting entity known as Cooperatives.
A cooperative is a corporation that is made up of a group of people who come together to meet a common goal. It is set up and controlled by its members and serves to advance the interests of those members. These interests could range from economic to environmental, and even cultural interests.
Just like a regular corporation, incorporating a cooperative can be done at the provincial or federal level. In Ontario, a cooperative is incorporated under the Co-operative Corporations Act and presently, 11 types of cooperatives are recognized. They include: service, consumer, supply, worker, marketing, childcare, housing, housing development, farming and supply, milk transport, and renewable energy. Therefore, individuals who have a common interest in these listed areas can come together to form a cooperative to protect and meet their collective needs.
One distinguishing factor about a cooperative is that it functions on democratic principles, so each member is entitled to only one vote at meetings. This structure ensures that no one member can take control over the operations of the cooperative.
A cooperative could be set up as a non-profit or profit organization, and where it’s for profit, such profit is distributed amongst its members.
Since a cooperative is incorporated, it can perform all the normal functions of a corporation such as entering into contracts and limiting the liability of its members. To find out more about corporations, you can check out our previous post here.
There are several advantages and disadvantages that a cooperative offers. Some of them are considered below:
Limited liability – members cannot be sued for the debts or acts of the cooperative.
Members manage the cooperative jointly.
Profit made is shared amongst the members of the cooperative.
It operates on a democratic system so that a member gets just one vote
Due to the size of membership, decision-making may be slow
There is a risk of conflict between members
There has to be active participation by members for the cooperative to succeed
The Ontario Co-operative Association has a much more thorough discussion about cooperatives at the following link.
In our prior blog posts, we’ve been able to explore various types of business structures available in Ontario; such as sole proprietorships, partnerships, corporations and now cooperatives. While each structure offers differing benefits and drawbacks, it is in your best interest to consult with a legal and accounting professional to guide you on which business structure option best supports your goals.
This is why Northview Law offers a free consultation available on this link. You can also contact us at 416-639-7639 for any questions or advice on choosing the right business structure for you - we look forward to connecting with you soon to help you advance you achieve your business goals.