FAQ
Here are some of our most frequently asked questions:
Are co-ops legal, like companies and societies?
Can anyone start a co-op?
How long does it take to start a co-op?
How much does it cost to start a co-op?
Can people donate money to a co-op?
Does "open and voluntary membership" mean you have to let anyone at all into the co-op?
Are co-ops legal, like companies and societies?
Yes, cooperatives can be incorporated under the relevant provincial or federal legislation governing them. For example, in British Columbia the provincial Cooperative Association Act provides the framework for incorporation.
Just as with an incorporated company or a society, incorporating a co-operative creates a legal entity that can apply for loans, purchase property or equipment and engage in contracts and other business activities in its name.
Incorporation also limits the liability of directors and members to the amount of their financial investment in the cooperative. Directors of cooperatives have the same responsibility to “direct and protect” the co-operative’s business and assets as do the directors of companies and societies.
There are groups that consider themselves to be cooperatives but have not incorporated, however, only an incorporated cooperative has the legal right to use the word “cooperative” in its name.
More information about incorporating a cooperative is at the BC government website.
Co-operatives can be initiated by anyone with an idea that involves a group of people working together to meet their common objectives. For example, artisans or farmers may want to start a co-op to help them market their product. Or a group may want “sell” their labour as worker-owners of a co-op.
Co-operatives also get started by people who want to purchase products or services. For more details, check out some Types of Co-operatives.
While one person may have the original idea, it is important for there to be group that will help to take the idea forward. In British Columbia it takes three people to incorporate a cooperative.
How long does it take to start a co-op?
Sometimes getting a group of people together who will be committed to seeing the process through from conception to launch takes a fair bit of time.
Or it may be that extensive market research is required to assess the feasibility of the enterprise.
On the other hand, we know of co-ops that had easy access to essential equipment or facilities and had the necessary skills to launch their project quickly.
Check out Devco's six-phase Co-op Development Process to get more of an idea about the steps involved in getting a co-op up and running.
How much does it cost to start a co-op?
Starting any business takes a lot of time, money and commitment. Some (approximate) costs in BC are the fees to:
- Reserve the co-op’s name $30*
- File incorporation documents $250*
Both fees are paid to the BC Ministry of Finance.
*amounts are current as of December 2007 - you can find out if there have been any changes here.
Other costs could include technical assistance from a co-op developer like Devco to help with all aspects of the development and launch of your co-op.
For help with designing and incorporating your co-op, fees can range from approximately $1,500 - $2,000.
For assistance throughout the entire development process (support for preparing your business plan, establishing policies, training directors, and helping to raise the capital you need) fees can be up to $20,000.
You may also choose to engage a lawyer for certain stages of your development, since most co-op developers are not qualified to provide legal advice.
There are also expenses to launch the business. These costs depend on the type and size of the business and will be established in your business plan.
To start a co-op you must be prepared for these and possibly other expenses.
You must also be prepared to spend a lot of time working on the start-up, generally without any financial compensation.
Can people donate money to a co-op?
Yes, people can donate money to a co-op. However, most co-ops will not be in a position to provide a “charitable donation” receipt for tax purposes.
It is difficult for a cooperative to receive charitable status from Canada Revenue Agency (CRA); it is especially difficult for business-related co-ops. If your intention is to donate money to a co-op in order to receive a tax deduction, check first to see if the co-op has charity status.
Since April, 2007, an amendment the BC Co-op Act means that “non-profit” co-ops can now be incorporated as Community Service Co-ops and have similar status to non-profit societies.
The change will facilitate the eligibility of community service co-ops for charitable status. See Community Service Co-ops for more information or contact the BC Co-operative Association.
There are other options for making a donation to a co-op. For example, you could donate to a charity that helps to set up co-ops as a way of alleviating poverty.
Some provinces have “community investment funds” which aid in the establishment of new co-ops or support for existing ones.
These funds provide tax incentives for investment. Although British Columbia does not currently have such a fund, the BC/Yukon CED Network is making efforts to move ahead with the idea.
Under certain circumstances, investment in the shares of a co-op can be eligible for inclusion in a self-administered RRSP - which means that investors can get a tax deduction for purchasing them.
You can find more information on the RRSP Program at the Canadian Worker Co-op Federation website.
Does "open and voluntary membership" mean you have to let anyone at all into the co-op?
No, it doesn’t. The Co-op Principles say membership in cooperatives is open “to all persons able to use their services and willing to accept the responsibilities of membership, without gender, social, racial, political, or religious discrimination”.
The Rules of each co-op give the directors, or someone appointed by them, the right to “accept, refuse or postpone consideration of” an application for membership. Usually, too, this is “at their sole discretion”.
This does not mean that the co-op can discriminate against anyone. However it does mean that a worker co-op has the right to refuse membership to someone who is not qualified for a particular job; or a housing co-op can restrict the number of members to the number of housing units available.
