think outside the boss nov 17th,
TRANSCRIPT
Think Outside the Boss
How to Create a Worker-Owned Business?
Agenda for Day
Presentation:
Introduction to coops
Entity Formation
Difference between Nonprofits and Coops
STRETCH BREAK - 5 mins
Managing the Business
Employment Law Issues
Getting the Green I: Loans and Memberships
Getting the Green II: Securities
How the Money Flows [Tax and Accounting]
Agenda for Day Part II
Snack Break
Breakout Sessions
Real Live Worker Owners (Mandela Food
Cooperative, Arizmendi Cooperative)
Legal Issues (Janelle Orsi, Sushil Jacob)
Bookkeeping and Accounting (Esther Cervantes,
Mary Carleton)
Coop Academy and Legal Cafe Information
(Ricardo)
INTRODUCTIONSushil Jacob
Staff Attorney
East Bay Community Law Center
Because the economy needs a new
“Operating System”
Why Worker
Cooperatives?
Beyond Mainstream Perceptions
How Coops Impact the
Economy
Cooperatives
are
everywhere!
What Are Worker
Cooperatives?
In a worker co-op, the workers are the members
(and thus the owners).
The Cooperative
Principles
1. Voluntary and open membership
2. Democratic member control
3. Members’ economic participation
4. Autonomy and independence
5. Education, training and information
6. Cooperation among coops (inter-cooperation)
7. Concern for community
What Make Worker Coops Different
From Other Coops?
Sovereignty of Labor
Remove the boss, remove
the exploitation of labor
History
Knights of
Labor
Mondragon, Spain
Cleveland, Ohio
Why Worker Ownership?
Higher Job Satisfaction
Higher Incomes
Sustainability/Involvem
ent in the local
community
Resiliency in economic
downturns
Next: Forming a Cooperative
Entity
Anuthara Hegoda, Law Clerk
Green-Collar Communities Clinic (GC3)
East Bay Community Law Center
Introduction to Legal entities
LEGAL ENTITIES
1. What are legal entities and why do we form
them?
2. What is limited liability?
3. What are the most common forms of legal
entity?
LEGAL ENTITY
A legal entity is the legal structure and rules under
which a business operates.
Examples of legal entities:
General stock corporation
Cooperative corporation
LLC
SHOULD YOU FORM AN
ENTITY?
Factors to consider:
Liability
Tax considerations
Mission/formation
Business goals
Control
Costs of formation
Capital requirements
Liability
Tax Treatment
Mission/
Formation
Liability
• Unlimited
• Can sue YOU
and your
business
Tax Treatment
• Avoid $800/year (min)
entity tax
• Taxed as partnership
Mission/Formation
• Avoid
organizational
formalities
PARTNERSHIPS
PROS AND CONS OF ENTITY
FORMATION
Pros• Can limit liability
• Credibility
• Attract investors
• Tax election
• Governance structure
Cons•Potential additional tax
•Minimum franchise tax
•Corporate formalities
•Time and cost of formation
• General Stock Corporation
• Cooperative Corporation
• Limited Liability Company (LLC)
LEGAL ENTITIES WE’LL
DISCUSS TODAY
GENERAL STOCK
CORPORATION
• The most common form of business entity
• Owned by shareholders, governed by a board of directors
• General purpose: make a profit for shareholders
• Shares of stock usually issued in exchange for capital contributions
• Voting power directly related to number of shares owned
• Entity-level taxation
COOPERATIVE
CORPORATION• Best incorporates cooperative principles of
democratic decision-making and worker-ownership
• General purpose: operate at cost for members
• Legal requirements e.g. notice period for member meetings, cap on capital distributions
• Must have “cooperative”
in business name
• One-member-one-vote principle
required by CA law
• Special tax deductions available
for patronage
LIMITED LIABILITY COMPANY
(LLC)
• Similar to corporation but more flexible
• Limited liability
• Governed by Operating Agreement between members
• Lower level of corporate formalities than corporations
• Can incorporate one-member-one-vote principle, but not required by law
• Members considered partners, not employees
• Pass-through taxation
FORMING A LEGAL ENTITY
Before incorporation:
1. Choose business name
• Check availability/avoid confusion
2. Prepare Bylaws or Operating Agreement
3. Prepare and file Articles of Incorporation or Articles
of Organization
4. File Statement of Information
FORMING A LEGAL ENTITY
After incorporation:
1. Obtain employment identification number with
IRS and employer account number with state
2. Open bank account
3. Obtain necessary licenses/permits/insurance
4. Hire/retain accountant or bookkeeper
5. Implement operational and management structure
REVIEW
1. What are legal entities and why do we form
them?
2. What is limited liability?
3. What are the most common forms of legal
entity?
Anuthara Hegoda, Law Clerk
Green-Collar Communities Clinic (GC3)
East Bay Community Law Center
Nonprofit Organization
“We’re a nonprofit organization . . .
We didn’t plan it that way, but that’s how
it worked out.”
What does it mean to you?
What is a nonprofit?
A corporation
That may be tax-exempt
Organized and operated exclusively
for a charitable purpose (aka
“exempt purpose”)
We know so much about healthy,
sustainable gardening . . . We should
start an URBAN FARM and teach
people about healthy eating through
a CAFÉ!
Green
Commonwealt
h Farm & Cafe
Nonprofit or co-op? 4 main factors to
consider
1. Purpose
2. Control
3. Funding
4. Profits
Nonprofit or co-op? Factors to
consider
1. Purpose
Who do you primarily hope to benefit?
Can you articulate an “exempt purpose”?
Let’s make Green
Commonwealth Farm &
Café a nonprofit!
It’ll be a 501(c)(3), and get
donations and grants, and
be exempt from taxes!
501(c)(3)
Tax-Exempt
Nonprofit
Corporation
CHARITABLE
/
EDUCATION
AL Purposes
PERSONAL/
COMMERCIAL
Purposes
Nonprofit or co-op? Factors to
consider
2. Control
Worker-owner control vs. majority
“independent” board
Nonprofit or co-op? Factors to
consider
3. Funding
Investments vs. contributions
Nonprofit or co-op? Factors to
consider
4. Profits
Distribution vs. reinvestment in the
exempt purpose
QUIZ: What are the 4 main factors to consider
when choosing between a nonprofit and a co-
op?
1.
2.
3.
4.
1. Purpose
2.
3.
4.
QUIZ: What are the 4 main factors to consider
when choosing between a nonprofit and a co-
op?
QUIZ: What are the 4 main factors to consider
when choosing between a nonprofit and a co-
op?
1. Purpose
2. Control
3.
4.
QUIZ: What are the 4 main factors to consider
when choosing between a nonprofit and a co-
op?
1. Purpose
2. Control
3. Funding
4.
QUIZ: What are the 4 main factors to consider
when choosing between a nonprofit and a co-
op?
1. Purpose
2. Control
3. Funding
4. Profits
The Bottom Line
A co-op is a for-profit business
that benefits its members (the
worker-owners)
A nonprofit organization is an
organization dedicated to serving
the community at large
GovernanceA Few Things Everyone
Should Know About
GovernanceWhoa! It’s all about
governance!
Every member has one vote…In the election of the board and major
decisions
Power
Power
Cooperatives don’t have to be
this:
Alvarado Street
Bakery Elects a
Board
Arizmendi Bakery
is a Collective
Members
Board
Every
Member is
on the
Board
Members
Board Every Member
is on the Board
Cooperative with a
small Board of
Directors
Collective
Officers don’t necessarily have more power than
othersSecretary: Gives notices, tracks membership, keeps minutes, etc.
President: Signs official documents
Treasurer: Keeps accounts
The State of California
wants to know that
SOMEONE is doing
this stuff.
Members Elect the Board on a
One Member, One Vote Basis
This means that co-ops
are ultimately
accountable to members,
even if members don’t
call the shots on a day to
day basis.
It helps to remember that there are
different realms in which people
exercise control:
1. Worker Owners/Members: Elect the Governing Board
and make certain major decisions.
2. Governing Board: Appoints the Officers and
managers; make high level decisions that steer the
company/organization toward its goals.
3. Officers: Corporations generally require President,
Secretary, and Treasurer. These are primarily
administrative in nature, and have special powers if you
want them to.
4. Managers: Manage the day-to-day operations.
I’m going to work in an
organization where my voice
matters, I have control over
my work, I can use my
creativity, build community,
and have fun!
Everyone is
behind the
wheel!
Beware of the
Tyranny of StructurelessnessI know
what we
should
do!
Rex
Cooperatives often make the mistake of
not adopting clear governance
procedures.
Need to be quite specific about stuff like:
•Procedures for meetings
•Procedures for making, reviewing, and adopting proposals
•Process for giving notice and creating agendas
•Spheres of decision-making, management, and operations
•Committees, Circles, Spheres, Managers, etc.
•Composition and election of governing bodies/committees,
etc.
•Voting rights
•Procedures for amending governing documents
•Conflict of interest policies
Note that this stuff is partially dictated
by the statute that governs the entity.
Documents can’t look like
this:
Give Governance Models
Some Legal TeethNeed to be quite specific about stuff like:
•Procedures for decision-making, AND
•Spheres of decision-making, management, and operations
•Committees, Circles, Spheres, Managers, etc.
•Composition and election of governing bodies/committees,
etc.
•Place, time, process for meetings
•Process for giving notice and creating agendas
•Voting rights
•Procedures for amending governing documents
•Conflict of interest policies
Meetings can’t feel like hell.
Get trained. Learn the system.
Practice it. Grow to love it.
Some worker cooperatives are
exploring Holacracy(www.holacracy.org)
1. Distributing Governance Throughout the
Organization, rather than requiring that all decisions flow up the
chain of command. Division of the organization into semi-autonomous
circles that are strategically interlocked to ensure communication flows up
to a general circle.
2. Roles: Each person in the
organization fills multiple
roles and can move in
and out of the roles
somewhat flexibly, rather
than filling a single
position with a single job
description. Within a role,
people have a lot of
autonomy.
3. Accountabilities:Each role is accountable
to a circle of people - i.e.,
they report to that group
on how they are doing
with the tasks required of
that role.
Role: Accountable to: Recycling Building Management Circle
Grant Writer Fundraising Circle
Cartoonist Communications Circle
Window Washer Building Management Circle
Legal Advice Legal Services Circle
Happy Hours Fun Circle
4. Highly Structured Meetings!
•Everyone Has a Voice: Most meetings are held
by going in a series of circles, which helps to
ensure that everyone has a voice. Everyone can
bring a proposal.
• Keeps Personality Politics at Bay: The high
level of structure keeps personality politics from
dominating organizational culture, and keeps
individuals from taking up too much space with too
much talking.
•Different Meeting Process for Different Types
of Meetings: Governance meetings, strategy
meetings, and tactical meetings.
5. Proposals Move Things Forward!
• Anyone can bring a proposal. In fact, everything discussed in
the context of a governance meeting is discussed in the context of
a proposal.
This allows everyone to follow their passions and
inspirations, and also have a voice in the direction of the
organization.
• Proposals are adapted through a structured feedback process.
•Proposals are accepted if no one objects to the proposal on
the basis that it moves the organization backward in its mission or
harms the organization.
• Accepted proposals can be revisited and adapted at any
time. This allows the organization to be nimble, experiment, shift
course quickly, and adjust to small changes, all while moving
forward.
Let’s encourage hundreds of
thousands of existing
businesses to sell to workers
and convert to cooperatives!
Because
Elizabeth Yates, Law Clerk
Green Collar Communities
East Bay Community Law Center
Employment Law and Coops
Roadmap
Traditional Employment vs. Cooperatives
Who is Considered an Employee / When Employment Laws Apply
Four Major Categories of Workers NOT Considered Employees
Traditional Employment =
Working for Others
Obligations of Employers
• Maintaining workers
compensation insurance;
• Paying minimum wage
and overtime;
• Payment of payroll taxes
and other withholdings;
• Complying with standards
for hours and working
conditions;
• Complying with
occupational safety and
health laws;
• Posting of certain kinds of
notices and posters
related to employees’
rights; and
• Adhering to certain
recordkeeping
requirements.
Verifying employees’
eligibility to work in the
U.S.
Cooperatives: Working WITH
Others
True or False:
Coops do NOT have to worry
about Employment Laws.
FALSE!
▪ Why?
▪ Because coop members might be considered employees under current labor and employment laws.
▪ So, the coop might need to comply with laws that are designed to protect workers!
Ok, so what do we do… ?
▪ Be safe = assume everyone is an employee.
▪ Then work backwards from there to see if you can find any exceptions.
4 Ways for People to Work Together and
NOT be Employees:
1. PARTNERS: People that work together for
their mutual benefit
2. VOLUNTEERS: People that do unpaid work
for public benefit, humanitarian, or charitable
purposes
3. INTERNS/TRAINEES: People that do
unpaid work for their own educational benefit
4. INDEPENDENT CONTRACTORS: People
that do work, but do so in an independent
manner
For more info on
partnerships, see pages 64-
69 in your TOTB Manual.
If NO “master-servant” relationship,
then NO employment laws apply
Partner Factors:
1) Control & operation of
business
2) Participation in profits and
losses
3) Employment security
PARTNERS: MUTUAL
BENEFIT
Volunteers: Public Benefit
But typically, you
CANNOT volunteer
for a for-profit
business. NOTE: most coops do NOT
fit under the charitable, religious, or humanitarian categories unless they are 501(c)(3) nonprofits.
As a general rule, you CAN volunteer for nonprofit
organizations that are engaged in charitable,
religious, or humanitarian purposes.
Interns/Trainees: Own
Educational Benefit
YES, for-profit
businesses can
have unpaid
interns!
BUT Interns
should be there
to LEARN!Want more info on these
criteria? See pages 60-62 in the
TOTB Manual.
Independent Contractors:
Independent Manner
Who controls the
manner and means of
production
How much skill is
required
Who owns the tools and
instrumentalities
Location of the work
Duration of the
relationship
Right to assign
additional projects to the
hired party
Extent of discretion
over work hours
The method of
payment
Whether the work is
part of the regular
business of the hiring
party
The provision of
employee benefits
The tax treatment of
the hired party
Just call them
Independent
Contractors?
Green Commonwealth Farm
Our coop founders decide to create an urban farm with
30 new members
Goals: access to fresh produce and also profit
All members are required to spend 3 hours per week
volunteering on the farm to get cheap produce
Each members spends time irrigating the farm, tilling
the beds, and harvesting, and also handle some
administrative tasks
Each 3-hour shift has a supervisor that manages the
members
What If:
To be safe…
Be more democratic!
Argue that your members are all partners and do the following:
(1) Have all members serve on the Board of Directors.
(2) Make decisions by a consensus process or with supermajority voting; this arguably gives each member a strong voice in each decision.
(3) Give each member a lot of control over their own work, or create many semi-autonomous departments or committees that control their own work, procedures, and hours.
(4) Make it somewhat difficult to fire people, by requiring a vote of a large number of members.
Moving On…
All of this is nice but…
…can we talk about the money now?
GETTING THE GREEN I: BANK
LOANS AND MEMBER
CONTRIBUTIONS
Show Me The MONEY!!
Businesses need money to operate, how
do we get some?
Overview
Traditional Businesses and Worker-
Cooperatives
Best Practices
Alternative Sources of Funding
Securities Law
Traditional Businesses
A Traditional Business (non-cooperatively run)
Typically, the owner would use person savings.
Over time, the business owner may approach a
bank or venture capitalist for additional funding.
Personal Savings
Loan
Alternatives
Venture Capital
Successful Business
Financing A Worker Co-op
Generally….
Member contributions/Outside Investors = Equity
Financing
Loans = Debt Financing
Member Contributions/Outside
Investors
Loans
Alternative Financing
Successful Worker Cooperative
Raising Money
LOANS – Traditional Lenders Banks want to see that you have enough money to
cover your debt.
Trend of Profitability
Personal Guarantee
Business Plan
Size of the Loan
Best Practices
Preparation
Understanding their Perspective
Attention to Detail
Research
Follow-up/Keep at it!
Alternative Ways to Raise $$$
Membership Capital
Donations
Micro Loans
Pre-Selling
Bartering
QUICK COMPARISON
Traditional Sources (Banks and Credit
Unions)
Alternative Financing (microloans, for
example)
Greater Funding
Potentially higher interest rates
May require 2 to 3 years of profitability
May require good credit, collateral, or
equity
Less Funding
Potentially lower interest rates
May invest in startups
Credit, collateral, and equity
requirements vary by lender
Getting the Green II: Securities
Law
Things
to Know
The
definition
of security
You
cannot
offer or
sell a
security
without
registering
… unless
you have
an
exemption
.
Basic Definition:
Security
You create a
security when
you ask people
to put money
into your
business or
venture, and
you offer them
a return. Walt Disney Stock Certificate
(a security!)
Why does Securities Law
Matter
Offering or selling securities
must be registered with the
proper authorities
Even ASKING people to
invest in your business
could be illegal, unless you
register that security.
So what are YOU doing that is
creating securities?
Selling Stock
Asking people to invest money in your business
Offering a share of your business’s profits
Member capital buy-in
Here Are a Few
Exemptions to
Help You Out!Follow along the “Think Outside the Boss”
Manual for more in depth details
CA Limited Offering Exemption §
25102(f)
In California
Up to 35 lenders or
investors
People with whom you
have a pre-existing
No Advertising
Simple online filing with
the CA Department of
Business Oversight
Unlimited # of Accredited
Investors
Really rich people Directors and
Officers
CA Cooperative Equity Exemption
§25100(r)
A California cooperative can raise up to $300 from each member without that qualifying as a security
Each person must be a member and have voting rights
Can’t use a promoter
CROWDFUNDI
NG
Crowdfunding
The CROWDFUND Act
PROPOSED EXEMPTION
You can raise up to $1,000,000
You can invest the larger of $2,000 or 5% of
annual income/net worth
Direct Public Offerings
Can publically advertiseinvestment opportunities to the public
Can DIRECTLY sell
securities without a
3rd party
intermediary
TO REVIEW!
1. Raising money from friends and family? Use a limited offering.
2. Raising money from directors, officers, managing members, or Mitt Romney? Think accredited investors.
3. Raising $300 from all your voting co-op members? Try the cooperative exemption.
4. Using the internet to raise little bits of money from lots of people? Might use crowdfunding in the future.
5. Don’t fit into an exemption? Don’t
Outside Investing vs. Cooperative
Principles
CASE STUDY: Equal Exchange
CD
Certificate of Deposits pooled together to guarantee loans to buy coffee, tea, and cocoa from farmer cooperatives at fair prices
Control preservedProfit returns limited to
the interest rate of CD
SECURITIES LAW REVIEW!
1. A security is created when you offer a return when you ask people for money for your business
2. When offering or selling securities, you must registerthe security unless…
3. There are several exemptions that worker-owned cooperatives can take advantage of to avoid registration of securities.
USE THEM!!
How Money Moves Through a Cooperative
(It’s AMAZING!)Presented by Janelle Orsi
Executive Director of the Sustainable Economies Law Center (TheSELC.org)
Featuring:Money
A B
My Capital Account:
$10,000
My Capital Account:
$10,000
IN
OUT
(Business expenses)C
$5
,00
0
I just work here.
A B
IN
OUT
C
(Net
income)
Worked1200 hours
Worked
1800 hours
Worked
1500 hours
Wag
es:
$30,0
00
A B
IN
OUT
C
(Net
income)
Worked1200 hours
Worked
1800 hours
Worked
1500 hours
Wag
es:
$30,0
00
Not!
In a typicalbusiness, workers work very hard to generate value…
Ideally, dollars are a reward for
generating value.
B
C
A
You
made
me!
But the money doesn’t get to reward those
workers for the full value they
generate…
And if a dollar could show us
how it feels about that…
AB
C
wages
profits
A B
IN
C
(Net
income)
Worked1200 hours
Worked
1800 hours
Worked
1500 hours
How much is “surplus?”
How much is “profit?”
OUT
A B
IN
C
(Net
income)
Worked1200 hours
Worked
1800 hours
Worked
1500 hours
How much is “surplus?”Member hours = 3000
How much is “profit?”Non-member hours = 1500
OUT
A B
IN
C
(Net
income)
Worked1200 hours
Worked
1800 hours
Worked
1500 hours
How much is “surplus?”Member hours = 3000 (2/3 of total hours)
How much is “profit?”Non-member hours = 1500(1/3 of total hours)
OUT
A B
IN
C
(Net
income)
Worked1200 hours
Worked
1800 hours
Worked
1500 hours
surplus = 2/3
profit = 1/3
OUT
A B
IN
C
(Net
income)
surplus
profit
OUT
A B
IN
C
(Net
income)
surplus
profit
The Collective
Account
OUT
Cooperatives have a special tax status!Thanks to Subchapter T of Internal Revenue Code!
• “Dividends” don’t get taxed twice: Net profits distributed to members are tax deductible to the cooperative
• Only if you are operating on a “cooperative basis,” which means: distributions of net profits are based on the "quantity or value of business done with or for such patron." Distributions to patrons not made in proportion to business done with the cooperative cannot qualify as patronage refunds.
RurDev.USDA.Gov has lots of resources explaining all this.
A B
IN
C
(Net
income)
surplus
profit
The Collective
Account
OUT
X
A B
IN
OUT
C
(Net
income)
surplus
profit
The Collective
Account
Worked1200 hours
Worked
1800 hours
I should get a
bonus…
$12,000A’s share
B’s share
A B
IN
OUT
(Net
income)
surplus
profit
The Collective
Account
$12,000A’s share
B’s share
They decided to pay 1/3 in cash and 2/3 in a “Written Notice of Allocation.”
A B
IN
OUT
(Net
income)
surplus
profit
The Collective
Account
$12,000A’s share
B’s share
They decided to pay 1/3 in cash and 2/3 in a “Written Notice of
Allocation.”
A B
IN
OUT
(Net
income)
surplus
profit
The Collective
Account
$12,000A’s share
B’s share
A B
IN
OUT
(Net
income)
surplus
profit
The Collective
Account
$12,000
My Capital Account:
$10,000 + $12,000
My Capital Account:
$10,000 + $8,000
A B
IN
OUT
(Net
income)
surplus
profit
The Collective
Account
$12,000
My Capital Account:
$10,000 + $12,000
My Capital Account:
$10,000 + $8,000
A B
IN
OUT
(Net
income)
surplus
profit
The Collective
Account
$12,000
My Capital Account:
$10,000 + $12,000
My Capital Account:
$10,000 + $8,000
What on earth is this???
Self-employment income? (15% extra in taxes)
orRegular income??
A B
IN
OUT
(Net
income)
surplus
profit
The Collective
Account
$12,000
My Capital Account:
$10,000 + $12,000
My Capital Account:
$10,000 + $8,000
B
My Capital Account:
$10,000 + $12,000
My Capital Account:
$10,000 + $8,000
A
OUT
B
My Capital Account:
$10,000 + $12,000
My Capital Account:
$10,000 + $8,000
A
OUT
IN
B
My Capital Account:
$10,000 +
$12,000
My Capital Account:
$10,000 +
$8,000
A
OUT
IN
$6,00
0
$9,00
0
Free money! You already paid taxes
on it!
B
My Capital
Account:
$10,000 +
$6,000 +
$8,000 =
$24,000
My Capital
Account:
$10,000 +
$4,000 +
$6,000 =
$20,000
A
B
My Capital
Account:
$10,000 +
$6,000 +
$8,000 =
$24,000
My Capital
Account:
$10,000 +
$4,000 +
$6,000 =
$20,000
A
It’s time for something new.
I’m leaving.
B
My Capital
Account:
$10,000 +
$6,000 +
$8,000 =
$24,000
My Capital
Account:
$10,000 +
$4,000 +
$6,000 =
$20,000
A
I’ll sell my share and get RICH!
Me:
Not really.
B
My Capital
Account:
$10,000 +
$6,000 +
$8,000 =
$24,000
A
$500$500$500
B DC
Member
hours
worked over
the years =
20,000
Member
hours
worked over
the years =
15,000
Member
hours
worked over
the years =
10,000
Let’s sell this business for $1,000,000 and retire!
B DC
Member
hours
worked over
the years =
20,000
Member
hours
worked over
the years =
15,000
Member
hours
worked over
the years =
10,000
We’re gonnaget RICH!
Us:
B DC
Member
hours
worked over
the years =
20,000
Member
hours
worked over
the years =
15,000
Member
hours
worked over
the years =
10,000
Hey! ‘Member
me?
A
B DC
Member
hours
worked over
the years =
20,000
4/10
of all hours
Member
hours
worked over
the years =
15,000
3/10
of all hours
Member
hours
worked over
the years =
10,000
2/10
of all hours
A
Member
hours
worked over
the years =
5,000
1/10
of all hours
B DC
Member
hours
worked over
the years =
20,000
4/10
of all hours
Member
hours
worked over
the years =
15,000
3/10
of all hours
Member
hours
worked over
the years =
10,000
2/10
of all hours
A
Member
hours
worked over
the years =
5,000
1/10
of all hours
A B
My Capital Account:
$10,000
My Capital Account:
$10,000
IN
OUT
(Business expenses)
But let’s say that you don’t make much money in the first year or two….
A B
My Capital Account:
$5,000
My Capital Account:
$5,000
IN
OUT
(Business expenses)
Should you share losses equally, even if one
person worked more?
A B
My Capital Account:
$6,000
My Capital Account:
$4,000
IN
OUT
(Business expenses)
Should you divide losses based on patronage??
Well that doesn’t seem fair…
A B
My Capital Account:
$5,000
My Capital Account:
$5,000
IN
OUT
(Business expenses)
If next year brings lots of surplus, should you divide it only based on next year’s patronage?
Well that doesn’t seem fair….
DC
My Capital Account:
$10,000My Capital Account:
$10,000
A B
My Capital Account:
$5,000
My Capital Account:
$5,000
IN
OUT
(Business expenses)
If next year brings lots of surplus, should you divide it only based on next year’s patronage?
DC
My Capital Account:
$10,000My Capital Account:
$10,000
Surplus!
A B
My Capital Account:
$15,000
My Capital Account:
$15,000
IN
OUT
(Business expenses)
If next year brings lots of surplus, should you divide it only based on next year’s patronage?
DC
My Capital Account:
$20,000My Capital Account:
$20,000
Surplus!
A B
My Capital Account:
$18,500
My Capital Account:
$18,500
IN
OUT
(Business expenses)
Can you reward A and B for their risk taking and hard work in creating new jobs?? Probably.
DC
My Capital Account:
$16,500My Capital Account:
$16,500
Measure patronage with more than just hours:Give value to seniority.Give value to sticking with it through the lean years!Give value to measurable job creation.Give value to experience.
A B
My Capital Account:
$10,000
My Capital Account:
$10,000
IN
OUT
(Business expenses)
You could also let the Collective Account go into the negative and require that next year’s earnings restore it.
The Collective
Account
A B
My Capital Account:
$5,000
My Capital Account:
$5,000
IN
OUT
(Business expenses)
Ok, we took a loss. Can we use that on our taxes to offset other income?
In a cooperative corporation, that’s awkward.You can’t issue a negative 1099-PATR.
A B
My Capital Account:
$5,000
My Capital Account:
$5,000
IN
OUT
(Business expenses)
Ok, we took a loss. Can we use that on our taxes to offset other income?
In a cooperative corporation, that’s awkward.You can’t issue a negative 1099-PATR.
There is no such thing as this:
A B
My Capital Account:
$5,000
My Capital Account:
$5,000
IN
OUT
(Business expenses)
Ok, we took a loss. Can we use that on our taxes to offset other income?
You can show a capital loss when you cash out of the cooperative down the road.
A B
My Capital Account:
$5,000
My Capital Account:
$5,000
IN
OUT
(Business expenses)
Ok, we took a loss. Can we use that on our taxes to offset other income?
If we were taxed like a partnership, then we can have a tax benefit from the loss!
LLCs and partnerships CAN do this:
Cooperative finances will change our economy!
B DCA
Cooperatives are meant to PROVIDE stable jobs, to reward workers EQUITABLY, to
keep wealth LOCAL, and to create LASTING enterprises in our COMMUNITIES.