Definition of a Cooperative

A cooperative is an association of persons (organization) that is owned and controlled by the people to meet their common economic, social, and/or cultural needs and aspirations through a jointly-owned and democratically controlled business (enterprise).  The people of the cooperative are those who use its products, supplies, and/or services. Profits are also often returned back to the members of the cooperative, however, cooperatives are often more focused on services for members than for investments.

Cooperatives can be created for a number of different reasons or to fulfill a number of different needs: jointly process goods, split costs, split control over work, purchasing power (bulk buys), shared employees, shared wages, etc.

Cooperative Legal Fact Sheet - Formation

Overview of legal formation cooperative.

Principles of a Cooperative

1) Voluntary and Open Membership: Cooperatives are voluntary organizations, open to all persons able to use their services and willing to accept the responsibilities and meet the requirements of membership, without gender, social, racial, political or religious discrimination. Members have control over setting policies for the co-op and making decisions for the cooperative.

2) Democratic Member Control: Cooperatives are democratic organizations controlled by their members, who actively participate in setting their policies and making decisions.

3) Member Economic Participation: Members contribute equitably to, and democratically control, the capital of their cooperative.

4) Autonomy and Independence: Cooperatives are autonomous, self-help organizations controlled by their members.

5) Education, Training, and Information: Cooperatives provide education and training for their members, elected representatives, managers, and employees so they can contribute to the development of their cooperatives. They inform the general public about the nature and benefits of cooperatives.

6) Cooperation among Cooperatives: Cooperatives serve their members most effectively and strengthen the cooperative movement by working together through local, national, regional, and international structures.

7) Concern for Community: Cooperatives work for the sustainable development of their communities through policies approved by their members.


Entity Options

Sole Proprietorship (SP)

  • Has no necessary or required filing requirements
  • Personally liable for all SP's debts, obligations, and liabilities

General Partnership (GP)

  • Needs a (permissive or optional) Statement of Partnership Authority
  • Partners are personally liable for GP's debts, obligations, and liabilities
Limited Partnership (LP)
  • Needs a Certification of Limited Partnership
  • Partner (limited) not personally liable LP's debt, obligations, or liabilities (Unless limited partner assists in the management or control of business)

Limited Liability Partnership (LLP)

  • Needs a Statement of Qualification
  • Partners are not liable for the LLP's (or other partner's) debts, obligations, or liabilities which arise from contract, tort, or otherwise (including the involvement of negligence or misconduct of the partner)

“S” Corporation & “C” Corporation

  • Need Articles of Incorporation
  • Members not personally liable for any debt, obligation, or liability (unless stated in Articles of Incorporation)

Limited Liability Company (LLC)

  • Need Articles of Organization
  • Members not personally liable for any debt, obligation, or liability (unless stated in Articles of Organization)


  • Need Articles of Incorporation
  • Member personal liability for loses depends on individual member equity

Limited Cooperative Association

  • Need Articles of Organization
  • No personal liability of members for debts and obligations, however if Limited Coop Association suffers loses the investment and equity may be at risk.
Information provided by Rocky Weber, Attorney