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Catalyzing worker co-ops & the solidarity economy

Steps to Organizing a Cooperative

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July 4, 2022
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Margaret Bau, long-time cooperative developer with the USDA, introduces us to the process of cooperative development and leads us through the steps to organize a cooperative!



Margaret Bau: I am with USDA Rural Development, a long time co-op developer, and we have Alex Stone, the Executive Director of CooperationWorks!, and we are pleased that we are able to offer this first in a series. What we're going to present today is just the basics on the steps to forming a cooperative. But before we get started, we are fortunate to have this presentation being simultaneously translated into Spanish by Eric and Melissa with the Interpreters Cooperative of Madison. So I'm going to hand it over to them to take care of some housekeeping details.

Spanish Interpreter: [provides instructions on accessing simultaneous interpretation] Thank you.

Margaret Bau: Perfect. Thank you so much. And this is wonderful to be able to have this translated into Spanish. This is being recorded and Alex will record this in English and the interpreters will record this in Spanish. And that way we will put this on the CooperationWorks! website and it will be available into the future.

So thank you, everyone. Welcome to [indecipherable]. As I mentioned, this is the first in a series about the steps to organizing a cooperative. What I'm going to do today is cover the basics that any type of cooperative needs — when you're developing it — needs to be covered. But then in in the coming months, we will go into more details based on industry, sector and methodology. And I'll go into that a little bit at the very end of our presentation.

So, Alex, if you wouldn't mind putting up the screen. Thank you for doing that. Great. So I've been a co-op developer, based in my home state of Wisconsin. I've helped organize about 35 different cooperatives in all kinds of different industry sectors. And I'd like to share with you some knowledge that that the field of cooperative development has developed, and some personal lessons I've learned along the way that I'd like to share with you as well. So, Alex, next slide, please.

So when it comes down to it, all cooperative development involves six steps that must be covered in order to to bring a cooperative idea to fruition. And I apologize for the the flower theme there. I'm a master gardener, it's spring here in Wisconsin, and I've got flowers on my mind. So let's go to the next slide.

So it all begins with an idea. Someone has an idea. And there's another caveat to that. Can a group effort address the idea that someone comes up with? Next slide, please.

So after coming up with the idea, the persons that come up with the idea need to explore that idea. You know, what are the basics of the business concept? And is the cooperative business structure the best means to meet that shared need need? And I like to say that coming up with a cooperative and the early steps of cooperative development involves a group of people that share the philosophy of a quote by Margaret Mead. Next slide, please.

And here is that quote from the noted anthropologist Margaret Mead. "Never doubt that a small group of thoughtful, committed citizens can change the world. Indeed, it's the only thing that ever has." Next slide.

So this thoughtful group of people that share a concept, that share an idea, that believe that the cooperative method is the best way to meet that need, are going to gather some information. They're going to gather information about what exactly is a cooperative, what is the cooperative legal structure and some of the other legal structures that are available. They'll want to talk to other cooperatives in both the industry that they're thinking about, along with other cooperatives in your region. It's important to explore the cooperative values and principles, and then you'll want to explore a little bit deeper the concept of an ownership culture and the concept of participatory democracy, because cooperatives are about economic democracy.

Then you want to go ahead and identify further resources. You may reach-out to a project coordinator, someone that will keep everyone on task. It doesn't have to be a full time job. It's just the point person that will share information about when the next meetings are. If people have questions, those questions can be referred to that person. It's a conduit of information, and this is a good time to reach-out to cooperative development centers, to individuals that are experienced in co-op development, and also some paid consultants, such as attorneys and accountants, that have experience with the cooperative model. And then this will bring us to the next phases of further defining the business concept. So let's move to the next slide.

So as you are doing this exploration, there are some key questions that you need to answer. First of all, is the idea a sound business idea? And of course, is there an advantage to working together as a group rather than trying to do this as a solo business enterprise? And is the cooperative model the best structure for meeting that need? And then it's also important to explore is the idea worth doing? Because cooperative development, as with any business develop, is a major investment of time, resources and energy on behalf of the people that are organizing. So one of the key concepts in cooperative development is that forming a cooperative, that cooperative should make a major difference in people's lives and the potential members lives. And this cooperative should be a business, not just a hobby. And I have an example to help illustrate that.

A couple of years ago, my neighbor across the street, Arlene, was an avid knitter, and she used to work part time at a local yarn shop here in town. And Arlene was very excited to be able to to have good quality yarns to knit. And she loved working at the yarn shop. But unfortunately, the the owner of that yarn shop — it was her dream to open this yarn shop — and she developed an allergy to fibers, airborne fibers. So the owner of this yarn shop was going to close the store. Well Arlene heard that I did this work with cooperative development, and one evening she came bounding across the street, knocked on my door, and said, "Margaret, oh, my goodness, I have such an important idea. We need to take that yarn shop and turn it into a cooperative.".

And I paused and I said, "Arlene, the people that buy yarn at that shop. Is this vital to their livelihoods? Do they depend on yarn to make income?".


"Does this have some strong cultural relevance? Is this an expression of who people are? Or is there the danger that people may just move on and start buying yarn at Walmart, or Joann Fabrics, or Michael’s, or wherever?".

And Arlene thought about it a bit and she's like, "You know what? There probably people who enjoy buying at the yarn shop. But if that yarn shop were to close, they would probably just move on and start buying their yarn at other places." So I use that as an example that the yarn shop concept, while it was really cool, was more of a hobby for a lot of the people that depended upon those supplies. So I just wanted to share that with you as an example, to try to ferret out the casual interest in cooperatives versus, hey, this is critical to who we are economically, culturally, socially. So next slide, please.

The next step is critical. And with that small group of people that have been working on exploring this concept, it's critical to discuss your mission and your values. This is time well-spent because every cooperative, every business, about a year and a half, two years into operations, will face some type of roadblock. Something will happen. People will hit the wall. And that is critical, that you have agreed upon shared mission and values before you hit that critical roadblock. Because when you hit that wall, you may discover, "Wait a minute, I got involved with this cooperative because... And you thought it was because... And you thought it was because... Wait a minute. You know, we don't agree on why we even started this to begin with."

By having a shared set of mission and values, when you hit that inevitable roadblock, you can step aside and say, "Wait a minute. Okay, we're facing this shared problem. Okay, let's look back and why we formed this to begin with, and based on those values, what are some options for moving forward?" So, by the very nature of cooperatives, cooperatives in their very DNA are principle driven businesses. And it's important to take that time early on to have an agreement to come to an agreement on what are your shared mission and values. Next slide, please.

So after discussing your shared mission and values with that small group of people that have been working on this concept, this is the time to share the idea with a wider group of people, to hold an exploratory meeting, to see if there are other people that share this idea, that are interested in this.

So at that meeting, you would present the concept. If there looks like there's interest in the room, you would ask people to form a steering committee. And also at this time, it would be appropriate to ask for some earnest money, some early investment to cover some of the organizing expenses, any legal expenses that may come up. And quite frankly, a little bit of funding, a little bit of money out of people's pockets is also a good indicator of their commitment to this concept.

And one of the lessons that I have learned over time, is that in forming the steering committee you just don't want to take a sheet of paper and send it around the room, and ask for people to volunteer to be on the steering committee. You'll probably want to have busy people on your steering committee, because busy people are the ones that get things done. And busy people don't necessarily just volunteer to do things. You may need to individually go and ask people. "Hey, John, we understand you've got some good experience in this industry," or, "Carla, you've got some experience with financials. Would you be willing to to serve on our steering committee?".

The ideal size for a steering committee, I would say, is about 3 to 6 people. And the steering committee is going to be the folks that carry the idea forward. That would keep the momentum moving. You can have other people serve on committees for specific projects because they may not have the time to devote to being on the on the steering committee, on the group that's really holding the body of knowledge, but they've got some specific viewpoints, or they've got some specific experience that would be relevant to share, and they only have about three months time to share. So you'll want to have a steering committee. But remember, you can certainly have smaller committees to work on specific topics as you're moving forward. So let's go to the next slide.

So, to recap with the idea exploration: you've got the initial idea; start gathering information; make sure you discuss your mission and values; hold a wider meeting to explore this idea; see if there's more people interested; form a steering committee from that. And then we'll move on to the next stage on our pedal of developing a cooperative. Next slide, please.

Okay. So we've gone through the idea exploration, now it's time to explore the viability of the business concept, and they'll be two important phases to the business viability. Next slide.

So, we've gone through the exploration process, where the proposal, it looks realistic; the cooperative model seems like a possible solution to to this idea; and you've held an exploratory meeting, and people are showing interest. Then it's time to proceed to doing a feasibility study. But if in the process, the interest in this just doesn't seem to be there, or the idea seems to be a little too fuzzy, it's okay to stop. Because it may not be the time for this idea. It may make more sense to do it a little further down the road. So let's move on to the next slide.

So conducting a feasibility study. The basic concept is, "Is this business concept viable?" You're going to have a third party do an industry analysis. That third party is going to look at the market potential, some of the technical aspects of the business, try to come up with some capital requirements, financial projections, and it's very helpful to have what we call scenarios: the best case scenario, the worst case scenario, and the so-so case scenario. And as I said, it's important to have a third party do this, specifically a third party that has previous experience with that industry.

You may be wondering, well, where do you find a consultant or an individual that has experience in that business? Probably when you were doing the exploratory phase, you may have reached out to others in that industry. It's okay to ask others in that industry, in other parts of the country or in your region, "Who do you trust to to inform your industry? Who who has the best knowledge?" It's certainly appropriate to reach out to a co-op development center. We in CooperationWorks! have a wonderful listserv in which we can pose questions to one another. "Has anyone done something in the meat processing industry?" "Has anyone done anything with taxicab companies?" And people from across the country are willing to share information. So if you don't know who could do a feasibility study in your industry, ask around. You'd be surprised, the names that come forward. People that people feel comfortable with. Next slide, please.

So, another decision point. So after you've gone to the feasibility study, does the concept still seem viable? And after doing that thorough review and presenting the information to the steering committee, does the steering committee feel that it's worth pursuing that business concept? If it looks viable and you and you still have the energy to move forward, then you'll want to move forward to a business plan. But if not, if the feasibility study comes back negative, or if after going through the feasibility study process, the steering committee just kind of runs out of steam, it's appropriate to stop because you may be saving yourselves valuable time and effort of not proceeding with a business idea that just doesn't have viability at this point. Let's move to the next slide.

So, this is the second part of business viability. And this is conducting a business plan. A business plan is about the details of your venture. It can be done by the steering committee or by consultants. You will probably be using information gleaned from the feasibility study. But you're going to make it your own. You're going to talk about your product or service that you're going to provide. You're going to talk about your marketing plan. You're going to talk about specifics about your operations. What does management look like? What does the organization look like? What are the finances and capitalization that are needed for your specific idea? And then, how much equity from the members is needed, and how much debt financing is needed? Like I said, this can be conducted internally, or you can bring in consultants to do it. But again, you're going to be using basic information that you pull from the feasibility study to help inform the specifics of your business plan. Next slide, please.

So, another decision point. If the market potential looks solid and member participation — there's still interest in moving forward — and the capitalization chances look reasonable, then you can proceed to actually incorporating and moving forward with the business idea. If not, stop. And that's okay. It's okay not to proceed if it's just not a feasible idea and there just isn't the energy to do it, or the finances just don't look possible. It's okay to stop because you could be saving yourselves valuable time and resources by not proceeding. Next slide, please.

Okay. We have gotten through two critical steps. The next step that we're going to talk about is the legal structure for your cooperative business. So let's move on. Next slide.

So there are some important documents that need to be drafted and signed. You'll want to work on the bylaws and the articles of incorporation. The articles of incorporation are actually filed with your state, or whatever state you're going to to incorporate under. And then the bylaws are a binding document amongst one another, but it's not actually filed with your state. The bylaws are kind of like an operating manual for how the business will move forward into the future, how it will be governed. So after you have worked with a co-op developer, a co op development center, and have an attorney to review those articles of incorporation and bylaws, you'll want to select people that will actually sign the articles of incorporation.

Oftentimes, these are people that have been involved from the very beginning, that have served on the steering committee. And those people that signed the articles of incorporation, they will act as the interim board of directors for the cooperative until  the cooperative actually can hold its first meeting and elect people from among the membership. So you will want to incorporate with your state agency, either in your state, or a state where you're going to do that with. You have some options to decide whether or not you will offer stock. And then you'll also want to start developing some policies and some controls, financial controls for the cooperative business.

You'll want to open up a banking account or an account with a credit union. You'll want to develop some checks and balances, such as a two party signatures on checks or things like that. If you are going to have employees of the cooperative business, now would be the time to start developing a personnel policy handbook and membership agreements. If that is what is needed by your cooperative, and some board policies such as conflict of interest, things like that. Next slide, please.

So, after creating those legal documents — and one thing I neglected to mention in in the previous slide is that please don't just borrow someone else's bylaws and just say these are the bylaws for our cooperative. You'll want to form a committee to actually work on the bylaws and make them your own. Because if you just borrow someone else's bylaws, those are someone else's bylaws, and they may not be relevant to who you are, what your mission and values are. Or frankly, if they are bylaws from another state, they may not even meet some of the legal requirements of the state in which you've incorporated. So, sorry about that.

So, after you've developed these these legal documents, you'll want to have an organizational meeting. And this is where you would present the results, the findings of the feasibility study, and the business plan. Be prepared to answer a lot of good questions that are going to come from people that are going to become member-owners of this potential cooperative. You'll want to have people actually adopt the bylaws, and then this would be the time to elect the permanent board, the initial board of directors, and to collect any type of membership equity that is required to become members of the cooperative. Next slide.

Okay. So we've gone through idea exploration. We've gone through the business viability. We have just discussed the legal structure. Now it's time to talk about capitalization: coming up with the funds to launch your cooperative business. Next slide, please.

There are various options that are available to cooperatives. You see them listed on the screen. Most cooperatives will use a combination of these options. One of the first options is membership equity investment by members in their cooperative business. Usually there's some type of initial membership requirement, and sometimes there's an annual fee to keep investment coming in. Cooperatives can also offer financialisation by transaction fees. Oftentimes with agricultural cooperatives, there's something called a 'per unit retain'. For instance, I live in Wisconsin with a lot of dairy cooperatives, and we talk about some type of surcharge on every hundredweight of milk that is delivered to the cooperative. Or there might be a 5% surcharge on the delivery of local foods. Or if there is a worker cooperative, it might be some hourly withholding until those new member owners reach their equity requirements to become members of the co-op.

Another option is to do an equity drive, and this is where you would offer common stock to the members. And this is whatever the set fee is that just gives you rights to become a member owner of the cooperative and to share in patronage refunds.

Then you can also offer preferred stock. And this allows members and the community to invest in the cooperative depending on how you are incorporated. Most states will cap the rate of return on investment at 8%. However, there are some new statutes out there that have an unlimited fee. Personally, I think 8% is quite generous. But depending on the size and scope of what you're doing, you may have investors that expect a higher rate of return. And the people that purchase preferred stock, that preferred stock has very limited voting rights. I live here in Wisconsin and voting rights for preferred stock holders are limited to matters of merger, consolidation, acquisition, those types of things. And no matter how much you have invested in a cooperative, you get one vote just like everyone else.

So there are other — you can also look at debt financing, such as subsidized loans. Those loans can come from members or people in the community. It would be at a rate mutually agreed upon by both the cooperative and the members. And of course, grants are attractive. However, I offer a major caution about pursuing grants. Trying to capitalize a cooperative with a grant can get people thinking into a nonprofit mentality, and very quickly you can find yourself on a treadmill of having to write grant after grant, after grant. And once the grants dry up, oftentimes the cooperative dissolves. It's important that that we stick to that cooperatives are businesses, and that they should be financed as businesses, with equity, with debt, with investment. And then, of course, there's the opportunity to do market rate loans as well. So next slide.

Okay. Next, we are coming upon becoming operational. So next slide.

I remember when I first started with USDA, there was like a ten step or a twelve step program, of the steps to forming a cooperative. And the last one was open for business. And I remember helping to organize one of my first cooperatives, this one right here, Cooperative Care. I think you get to the point where you started operations, it's like, "oh my gosh, now what? There's like a ton of details that need to happen." But anyhow, some of the immediate tasks that you need to take care of after you've incorporated is you will need to register on the IRS, with an employer identification number an EIN. And if you get stuck, because the cooperative option doesn't show up right away, contact a co-op developer or a co-op development center, and they can guide you through that option on the IRS website.

Any type of board and business insurance, and I highly recommend getting a business liability insurance, and a board and officers insurance for your board of directors as well. Any licensing that's needed. Worker's compensation, if you are hiring employees. Then you'll want to proceed with hiring or contracting with a manager and then that manager would be empowered to go ahead and hire other employees as needed as presented in the business plan and then moving forward with acquiring facilities and equipment. Next slide, please.

So begin operations, go off and do a soft opening, and then perhaps a grand opening with some type of ribbon cutting and public relations. It's just the beginning. As you begin operations. Next slide, please.

And then a critical piece in cooperative development that goes on over a period of years is cooperative education and training. Next slide, please.

So in the cooperative development process, you want to help the cooperative business get on its feet, too, to begin to walk upright. And it's important to provide training to both the membership and the board of directors and to help both groups think longer term, because it's easy to get caught up in all the details of operations and that type of thing, and lose sight of the bigger goals of the governance issues that a board of directors needs to be engaged with. So as the group is moving forward, a co-op developer can help model some good board behavior and help the group think through some policies that they want to develop, making sure that there's a strategic plan, making sure that the board does an annual review of its manager, and doing an accurate review of itself. It's so easy in in all the excitement that goes on with beginning operations and in the in the initial years to lose sight that you need to touch base, you need to do a review. You need to to see how are you doing and to give good feedback to that initial manager. And so member education and involvement. Something to think about.

I talked about education and training. Education is the ongoing agreement as to why you formed the cooperative, touching base on those mission and values so that into the future as new people join the cooperative, or this lasts for years and you start to see new generations of people coming into the cooperative, it's critical to keep touching base as to why you formed this cooperative, what are your mission, what are your values? And coming back to that over and over again.

Training provides you the 'how to be a cooperative,' such as how to read the financials, how to conduct a board meeting, how to conduct an annual membership meeting. It's more the mechanics. Whereas education is the why. Why are you a cooperative? And I mentioned the annual membership meeting that is required by state law. And at that annual membership meeting, you'll cover three things an update on how the cooperative is doing financial information, and then voting upon the board of directors and voting upon any bylaw changes, or even changes to your articles of incorporation. Next slide.

So, as you're organizing a cooperative, general rule of thumb it takes about — for most cooperatives — 2 to 3 years from the initial idea phase to actually starting operations. I have seen in a few cases I was involved with one cooperative that organized within three months time. It was a very small shared services co-op, a group of people that knew each other well, and they were able to form it very quickly. Some of the consumer food co-ops that are out there, they're talking about a more elaborate strategy for starting up, and oftentimes those cooperatives can take 6 to 7 years. And that will be one of the upcoming series presentations that we will have about that particular model. But generally, it takes about 2 to 3 years because there are a lot of steps to take to go through. This is a shared business. You can't just do something on the back of an envelope that individual entrepreneurs might feel that they can do. There are a lot of good checks and balances to make sure that everyone is on board, that there is some good thinking that goes behind actually launching the business. So with that, move on to the next slide.

The steps, in summary — all cooperatives, all cooperative development, needs to cover these steps: the idea exploration; business viability, if it looks viable from both the feasibility study and the business plan; move forward with incorporation and other legal structures that are needed; capitalization — these are businesses. After all. If you've got the capitalization together you can move to operations, beginning the cooperative business. And then the ongoing education and training to make sure that members are fully participating in the life of their cooperative business. Next slide, please. So this was the introductory webinar on the basic six steps of forming a cooperative.

In the future, we're going to have we have dates set for June 17th and July 15th. We're going to cover both sector specific steps in forming a housing cooperative, in converting existing businesses to worker cooperatives and the consumer food models, as I mentioned before. And then we're also going to take a look at specific development methods such as cooperative academies, cooperative incubators, and there's a good example of cooperative accelerators out there. So please mark your calendars for June 17th, July 15th, and we'll have later dates coming up as well. So the next slide is contact information for me, if you didn't see that already. But that brings us to the end of my formal presentation. So why don't we go ahead and answer some questions? And I think I'm going to ask Alex to help with fielding some of those questions. And maybe we can go to the screen to see each other.

Alex Stone: We do want people to be able to unmute themselves and ask questions, or just drop them in the chat box, or either.

Margaret Bau: Whichever people feel more comfortable with. I can start asking questions of you.

Alex Stone: Shy folks here today, or you just explained everything with perfect clarity.

Margaret Bau: Yeah, right.

Michelle: Well, I'm not shy. My name is Michelle and I wanted to ask about — and you'll probably get to these things in other presentations, but it'd be helpful to kind of know a little bit about the preferred stock and the option of stock versus the membership, and maybe even what combination you mentioned people will sometimes use.

Margaret Bau: Right. Oh, those are really good questions, and I didn't dive into a lot of details because this was just an overview. But excellent questions, Michelle. We are fortunate with cooperatives that we have several options to us in capitalizing a cooperative. And the third cooperative principle is member economic participation. These are businesses, and the members of the cooperative need to participate in the economic life of this cooperative. So one of the things that cooperatives can do is, cooperatives have a few exemptions that are available to to them from the Securities and Exchange Commission.

The SEC, the Securities and Exchange Commission was created back in the 1930s to help protect people from some of the unscrupulous investment opportunities that became available in the Roaring 1920s. People invested and they lost their life savings, and it helped to create the Great Depression. Securities and Exchange Commission was created to help protect people from those type of investments. So for larger corporations, for larger business entities, you can raise money — substantial amounts of money — but you need to register that with the Securities and Exchange Commission. And basically, one of the things that is done with that is that in the process of registering, you will create a prospectus, which is like a thick document that lists everything that could possibly go wrong with your investment, with that could possibly go wrong with that business. And it's done as the Securities Exchange Commission, to be a third party of information.

With cooperatives because of our cooperative principles of transparency, good communication, ongoing training that people understand financial documents, especially the documents available through the cooperatives, it is assumed that members have access to high quality information. They understand the information and the local community as well. So there are a couple of exemptions that allow cooperatives to offer preferred stock to members or the local community, as long as it's within your state, or certain exemptions of accredited versus the number of non-accredited members, that you can offer preferred stock without having to register with the Securities and Exchange Commission. And I'm involved with two really big projects right now, and we're finding out, yeah, that's a really good thing to not have to file with the Securities and Exchange Commission.

So oftentimes with cooperatives, when you're offering preferred stock, in most states, there's a cap of 8% of a return on investment for that preferred stock, although. In today's day, that's really high. The actual rate tends to be more in the 4 to 5% range. We call it patient capital is what we're trying to attract. When you offer preferred stock, people need to be very much educated that the preferred stock is being offered by the cooperative. Based on the decision of the board of directors, the board of directors every year will evaluate how the cooperative has done financially in the past year, and then the board will decide, okay, we're going to pay people that have hold the preferred stock in cash that year. Or we may just, you know, "We're not quite there yet. We're just going to accumulate. It's good. It's going to be rolled over to the next year." So people need to be well-educated about if they're going to buy preferred stock and invest in a cooperative, they need to be educated that this isn't something that's done on the stock market, this is something that's held locally. It's very much the decision of the board of directors from year to year what the payment will be — there's an agreed upon payment, but how often it will be paid out from year to year. And this is a topic for for further training, obviously, but it is a tool that we in cooperative development have to help cooperatives capitalize, and to do so on a reasonable basis. Great question, Michelle.

Alex Stone: So we've had a couple of questions come in through the chat. And also one comment that I'll read out that just says, "Thanks for the thoughts about using grant money in the future of the business. It does poison the well." So, good thing to think about. We have a question from Molly who currently has unstable Internet but has a question about the 'ways to capitalize' slide. "Under member equity listed initial and then annual. What do you mean by annual? An ongoing annual member fee, or paying off the initial member investment on an annual basis?

Margaret Bau: Okay. Yeah, good question. By that slide, I meant that sometimes there's cooperatives, for instance, the local food co-op that I belong to here, there's a $40 annual membership fee. I paid an initial equity investment and then I've got a yearly membership fee. Some cooperatives do that, especially some of the consumer co-ops. So that's what I meant by that.

Alex Stone: Thanks, Margaret. And we have another question that came in from Caitlin. Should the developer generally bring in a co-op friendly attorney and accountant to work with the client during the development of policies and controls, bylaws, member agreements, etc.? If you don't have an attorney on staff, is it wiser to send the client directly to those professionals? Which steps really require a lawyer and shouldn't be attempted by non attorneys?

Margaret Bau: Yes. Yes. Oh, excellent question. Excellent question. I really encourage people to develop bylaws among themselves as best they can with the help of a co-op developer or a co-op development center, and then ask an attorney that has experience with cooperatives to review those bylaws. You could ask an attorney to create bylaws for you from from scratch, but you lose something in the process because there's something to be said for a group of people going through the process and thinking through what are our membership requirements? How big of a board of directors do we want to have? Do we want to have term limits for the board of directors? Those things are those are important issues to have discussions about, and that is a role that the co-op developer can play, with helping people at that subcommittee think through those issues. Because if you just pass it off to to an attorney, you lose that richness. And plus, you know the attorney costs a little bit of money. There are certain points, especially if you are offering preferred stock, absolutely. Work with an attorney and get in touch with an accountant that has familiarity with cooperatives. If you're offering preferred stock, absolutely you need to have an attorney involved with that, because you don't want to get into violations with the Securities and Exchange Commission. There are some experienced co-op developers on this call. We might call on some people. I'm looking at you, Diane Gasaway if you want to share any thoughts on some of these points, or some of these questions that have come up.

Diane Gasaway: I just want to make sure that I'm still saying the same message after all these years. Thanks, Margaret. You're always really great and so, so wonderful at explaining some what can be complicated issues.

Margaret Bau: Any thoughts on — I mean you're seeing some interest now with COVID, you're seeing a lot of interest in cooperatives. Any thoughts that you might want to share on some of the steps? Anything strike you?

Diane Gasaway: No, I think you're absolutely spot on. And I appreciate the last response that you had about, you know, when to bring in an attorney and not. And that's typically what we do as well as, you know, guide people through the process and definitely bring in an attorney there once we have drafts to make sure that everything agrees with one another. So the files agree with the articles and membership agreement and policies, and you're not going sideways of your state laws. Yeah.

Margaret Bau: Good points. Yeah. Thank you for that. Thank you, Diane.

Alex Stone: We have had a couple more questions come in from folks over chat. So from Sandra, we have, "What, one or two previous mistakes? What do you want others to avoid making?"

Margaret Bau: Oh, good Lord. Oh, man. Okay. I learned the hard way about sending around a piece of paper to have people sign up to be on the steering committee. I'll never do that again. Some people that step forward may have time on their hands for a reason. So that was an important thing.

And the another reason that I kept stressing the importance of agreeing upon mission and values early on, I have journeyed with a lot of co-ops that reach that that wall, you know, it's like clockwork. A year and a half, two years into opening, something happens. Something happens with the business, or people start to disagree with one another, or things get weird. And it's so important to have had that discussion about mission and values and being able to come back to that when you reach those difficult points. And, you know, coming up within USDA, some of my counterparts used to think, "oh, that's Margaret. She's being touchy feely." You know, it's like, "no, these are still issues." And this really does come up.

Alex Stone: We had another question come in from Michelle. Can you share some examples of restaurant cooperatives? And I know that Matthew Epperson has already volunteered to share a list with Michelle as well. But if you have any for the call, please let us know.

Margaret Bau: Yeah. There's the famous one in — I'm going to have to ask some people, other people on this on this webinar to help me out. There's one in southeast Ohio. It's a famous worker cooperative. It's been around for long. Nueva. it's Mexican. It's Latin American food. Nueva with a casa. It's done as a worker cooperative. Um hmm. I don't know if anyone else. Oh, Diane, you've got an example. Blue Scorcher Bakery and Cafe. New Moon Cafe. Casa Nuevo Restaurant — that was one, thank you. Cheeseboard in California. There's some good examples out there. Most of them have tended to be worker cooperatives, not as many consumer or multi-stakeholder, where you would have worker and consumer, although it could be done. But there again, it gets into issues of is it a casual hobby for people? Whereas for restaurant workers it's their livelihoods. So there's more at stake.

Margaret Bau: If anyone would like to unmute and offer some observations on that. If I could ask of the person that asked that question, I think it was is Michelle, what are you thinking?

Michelle: Well, so we're thinking it needs to be a community-owned cooperative, or a consumer-owned cooperative. It's located a couple of blocks from George Floyd Square. And there I think it would be a nice thing for the community to sort of own and operate, or at least have the workers operate. So. But to your point about how important and valuable is it to the community, is the question. But I think it could be a uniting factor.

Margaret Bau: Right. In the definition of a cooperative, it's shared cultural, social, economic aspirations. So, yeah, good point. do we have any last questions? We're getting close to — oh, goodness, we've got extra time, don't we?

Alex Stone: I mean, I don't think anybody minds getting a little bit of time back in their day but we do have until 1:30 if there are any lingering questions or things folks want addressed.

Margaret Bau: Other questions, or I see some other experienced co-op developers. I might do the preschool teacher and start calling out people. Like Stewart.

Stewart: I don't know if you noticed, but I only just joined. I was held up on a call until just now, so if I asked a question or answered one, I would be totally in the dark, okay. Sorry, teacher, I wasn't paying attention.

Alex Stone: I think if there are no more questions, we can wrap up.

Margaret Bau: Okay.

Alex Stone: I would just put in a couple of plugs. First is thanking Margaret Bau for another concise, really clear, engaging presentation on the co-op development process. We're really lucky to have her as a member with CW and be willing to do these webinars for us. So, thank you so much.

And she had mentioned in her presentation that this is actually the first in a series. So I'll just reiterate that we're going to be exploring cooperative development for the housing sector, worker co-op development, and consumer food co-op development, along with some specific methods that are not necessarily tied to a sector. Looking at incubators, accelerators, co-op academies. So we have the dates for the next couple already set and I'll send out an email shortly covering those and we're still working out the dates for the later ones, but please stay tuned.

And if you're interested in becoming a cooperative developer, we're learning more and more deeply. We do also offer a bigger training that is three week-long sessions. And because of everything that's happened in the last year, they're actually all virtual now. And this year, we're offering building blocks, which is the first of those sessions four times. The first one is going to be offered from June 30th to July 23rd, and registration opens on Monday. So I'll include a link to that on our follow up email as well. And you can check that out if you are interested in deepening your knowledge and skills in cooperative development even further. And I also just want to thank the Interpreters Cooperative of Madison for providing interpretation. We're really lucky to be able to connect with them and expand access to these really great presentations. So, thank you so much. That's really great having Eric and Melissa here with us today. So, thank you. And I'll hand it over to Margaret for any final wind-down.

Margaret Bau: Thank you so much. Thank you, CooperationWorks!. Thank you to the Professional Development Committee for coming up with this topic idea. And we want to make sure that this is recorded in both English and Spanish and make it available on our website. It's a wonderful opportunity. You'd be surprised. People stumble across these YouTube videos and and watch them. And so it's it's great to have this resource. So thank you CooperationWorks! for recording this and making this available into the future. Great job, everyone. Thank you for all you do for cooperative development.

Alex Stone: Have a great day.

Margaret Bau: Take care.


This transcript has been lightly edited for readability.


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