There are 10 steps to forming a co-operative.

The 10 steps to forming a co-operative happen in 3 stages: Developing the business idea, assessing interest and viability, and start-up. 

Develop the co-operative business idea

 

Step 1: Assemble a group of interested people

  • Identify the need the co-op will aim to meet:
    • unavailability or instability of work
    • unavailability of certain products and services
    • poor quality of certain products and services
    • products and services that are overpriced
    • development or expansion of market
    • improved market access for producers through co-operation
    • better working conditions through collective enterprise.
  • Identify what professional help is needed to launch the business:
    • co-operative developer
    • experts advisors on feasibility study and business plan
    • financial consultant
    • accounting consultant, legal consultant, marketing consultant, others.

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Step 2: Conduct a pre-feasibility study

  • Conduct a preliminary market review.
  • Identify whether necessary technical and financial assistance is available.
  • Assess receptiveness to the co-operative business in the local community.
  • Evaluate if the co-operative is the best legal framework to use or if the kind of co-operative selected is the most suitable.
  • Define the intended benefits for members (e.g. quality, price) and the co-operative’s characteristics to determine what kind of co-operative it is:
    • products and services offered (consumers' co-operative)
    • products and services marketed (producers' co-operative)
    • salaries and working conditions (workers' co-operative)
    • New services for the community (multi-stakeholder co-operative) 
  • Evaluate the project's potential to attract the number of members needed to make it viable.

If this study shows that the planned co-operative is feasible, the group can proceed to the second phase. If the study suggests it is not feasible, or if the study is not conclusive, the group should re-evaluate its business idea.  

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Co-ordinate the pre co-operative's activities

 

Step 3: Hold an organizing meeting

  • Choose the corporate name of the co-operative and the location of its head office. 
  • Define the co-operative's mission (objectives, purpose).
  • Elect a temporary board of directors and secretary to the board.
  • Officially submit an application for incorporation as a co-operative:
    • from the provincial ministry responsible for co-operatives if the co-operative is local/provincial
    • from Industry Canada, if you are incorporating federally.

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Step 4: Conduct a viability study

  • Obtain financing for the viability study from such sources as:
    • internal financing by the members
    • special grant
    • a technical assistance or business start-up agreement with a specialized organization.
  • Define the strategic objectives.
  • Evaluate the various strategic scenarios, production costs, and human, material and financial resources necessary.
  • Evaluate the various start-up financing scenarios.
  • Do a preliminary projection of budgeted statements and of a cash budget (revenues and expenditures, investments by members in share capital, partners, credit union or bank loans, grants).

If the study shows that the new co-operative will be financially viable, the group can proceed to the third phase. If the study concludes that the planned co-operative, while seeming feasible, would not be financially viable, the group should consider terminating the project.

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Organize and start up the co-operative

 

Step 5: Organize the association

  • Set up ad hoc committees to distribute the workload among the members of the temporary board of directors. For example:

    • planning committee

    • training committee

    • committee to draft by-laws.

  • Decide on the association's structure and define the various categories of members, if necessary (consumers, suppliers, workers).
  • Determine the roles and responsibilities of the various democratic bodies (general meeting, board of directors, committees).
  • Establish the articles and by-laws.
  • Recruit members.
  • Organize a program to train members in the administration and management of a co-operative, the chairing and running of annual meetings (e.g. "parliamentary procedure"), and the operation of a committee or board.

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Step 6: Plan the operation of the enterprise

  • Draw up an organization chart of who is involved in the enterprise.
  • Do the operational planning for the first year of activities.
  • Negotiate contracts for the supply of necessary products and services (inputs).
  • Negotiate sales or marketing contracts, as required (depending on the nature of the enterprise).
  • Implement an accounting system.
  • Define the duties and responsibilities of each position. 
  • Develop a salary policy.
  • Select and recruit the person to occupy the position of chief executive officer/general manager.

Step 7: Plan and organize the enterprise's start-up financing

  • Determine the value of the membership share to become a member (what members must pay).
  • Determine the value of the share capital on start-up and during the first three years of operation (in terms of the expected growth in the number of members). 
  • Prepare by-laws governing preferred shares (if applicable).
  • Prepare by-laws governing loans (if applicable). 
  • Draw up the overall financing plan for the first three years of operation.
  • Draw up the business plan. 
  • Negotiate the capital contribution of external financial partners (if necessary): venture capital corporations, private funds or credit union investment programs.
  • Apply for a government start-up grant (if they are available and if required).
  • Negotiate medium term credit union or bank loans and a line of credit.

Step 8: Attend to all legal aspects of the enterprise's operations

  • Ensure legal formalities are properly handled. Seek expert legal assistance where needed.
  • Obtain the legal authorization necessary to start up the enterprise's activities:
    •  federal: obtain employer/business numbers  (e.g. for GST/HST) from Canada Revenue Agency
    • provincial: numbers for the provincial revenue department, for provincial tax 
    • municipal: municipal permit, employer number, etc.
  • Determine if there are other federal/provincial registrations or licensing requirements for the particular operation and ensure these are met.

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Step 9: Recruit and train the enterprise's staff

  • Select and recruit employees (a responsibility of the CEO, except in worker co-operatives, where recruitment decisions are usually made collectively).
  • Organize and offer a training program that includes information on co-operatives for staff.

Step 10: Hold the first general meeting

  • Adopt the by-laws. 
  • Adopt the business plan.
  • Approve the co-operative's application for membership in the appropriate federation or association.
  • Appoint an external auditor.
  • Elect the members of the board of directors, and of any other committees (if the general meeting has the power to do this).

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