What is a cooperative and how do I create one?

A cooperative is a group of people who come together to meet a mutual need. Creating a cooperative is a long-term project that must be well planned. Here are 10 steps for creating a cooperative.

A cooperative brings together people or businesses with mutual needs that join forces to operate a business according to cooperative principles in order to meet those needs. Members exercise their power democratically. Like a corporation, a cooperative is a legal person distinct from its members, and each member's liability is limited to the value of the shares they hold. However, a cooperative differs from other types of businesses because of the way surpluses are distributed. Among other uses, they are given to members in the form of dividends according to their use of each of the cooperative's services.

Even though cooperatives must be profitable, their primary objective is to meet members' needs as effectively as possible. They also belong to all their members equally. When decisions must be made, they are made democratically according to the 1 member, 1 vote principle.

In other words, a cooperative is:

  • an association of people who collectively carry out their entrepreneurial responsibilities
  • a company whose co-owners are users
  • a company whose objective is to maximize the advantages that members enjoy as entrepreneurs, users and citizens
  • a company that uses capital but does not base members' power on it
  • a company whose rules guarantee members the equal exercise of power and the fair distribution of contributions and sharing of profits
  • a company that promotes inter-cooperation to develop its business and contribute to the development of its community
  • a company makes education 1 of its key operational mechanisms, particularly through sharing knowledge and information

Steps for creating a cooperative

Do you want to set up a new cooperative but don't know where to begin? Here are 10 steps divided into 3 main phases.

Phase 1 - Development

  1. Define the need

    A cooperative is born out of a desire expressed by its future members to meet a need. It is therefore crucial that the need be well defined. Then, you must find out if there is a desire to meet the need collectively. Without the buy-in of a critical number of people, a cooperative cannot be created.

  2. Hold an information meeting

    Once the contemplation stage of the project is completed, an information meeting should be held. Cooperative development advisors from Coopérative de développement régional du Québec (CDRQ) and industry federations will be able to assess the project and support the promoters through the subsequent steps.

    For more information, see Start your own business.

  3. Form a provisional committee

    A provisional committee must be formed to work on the project. The people on the committee must be representative of future members and prepared to invest time and energy in it.

  4. Develop a business plan

    The drafting of a business plan by the provisional committee members is an important step in completing the project. In addition to guiding the committee and future members, the business plan is needed to obtain financing from lenders.

    For more information, see Desjardins interactive business plan.

  5. Draft by-laws

    The cooperative's by-laws define the structure of the association. Within the limits of the law, the rules distribute power between the cooperative's different bodies (board of directors, member assembly, officers, etc.).

  6. Recruit future members

    Once the business plan and by-laws have been drafted, the cooperative is well defined and members can be recruited. This step helps to determine whether the targeted members are responding according to the predictions in the business plan. If they are, the cooperative can enter the start-up phase.

Phase 2 - Start-up

  1. Apply for incorporation

    To legally incorporate the cooperative, the articles must be filed with the Ministère des Finances et de l’Économie (MFEQ). The cooperative development advisor takes care of this step as the sponsor. Once the certificate of incorporation has been issued, the cooperative officially exists.

  2. Hold an organization meeting

    The cooperative must have a general meeting framework for operations. At the meeting, members adopt the cooperative by-laws prepared by the provisional committee and elect the first board of directors.

  3. Begin operations

    The newly elected board of directors can being operations according to the business plan. The members of the board sign initial agreements, hire staff, draft policies and so on.

Phase 3 - Monitoring

  1. Monitor the cooperative

Work still continues even though operations have begun. Administrators must be trained, new members admitted, the annual general meeting and financial statements prepared and so on. In short, the cooperative must prove to be working well, meeting its obligation and continually striving to better meet members' needs.

Creating a cooperative is a long-term endeavour, just like any other business project. It will certainly require a considerable amount of your time and energy, but you will gain personal satisfaction for having been a part of it. You will see the power of teamwork, cooperation and democracy, and help meet a need shared by members of your community.

Source: Coopérative de développement régional du Québec (CDRQ) (site in French only)