2018-05-15 11:17:27Business IdeasEnglishTake a look at a few important decisions you'll have to make when creating a cooperative in Ontario. Once you decide your legal entity...https://quickbooks.intuit.com/ca/resources/ca_qrc/uploads/2018/04/Man-Explaining-Start-Co-Operative-Toront.jpghttps://quickbooks.intuit.com/ca/resources/business-ideas/form-co-operative-toronto/How To Form A Co-operative (Coop) In Ontario

How To Form A Co-operative (Coop) In Ontario

2 min read

If you’re going to turn your dream of starting a company into reality, you’ll have to make a few important decisions. This is especially true when starting a cooperative. Because it’s an entirely different type of legal business, you’ll have different hoops to jump through about registration, meeting business requirements, and filing.

Cooperative vs. Traditional Business Models

Your business cooperative will be a little different than a normal business. Cooperatives are member-owned, so you don’t have outside investors or shareholders. Instead, the people who work for the company hold an ownership stake. Whatever profits are earned are generally returned to the owners, although there’s typically a delay between when the profits are earned and cash is distributed. Every member also gets an equal vote when deciding matters.

Provincial vs. Federal Incorporation

To create your cooperative, it’s necessary to incorporate your company by filing with either the provincial or federal government. You probably have to pick a unique business name, send the appropriate forms to the Financial Services Commission of Ontario (FSCO), and pay incorporation fees.

You should keep a few things in mind when choosing which way to incorporate. First, if you plan on opening up businesses in more than one province, you’ll be covered if you file federally. You’ll work with a different government agency (Corporations Canada) and the fees may be different depending on your application. There’s additional paperwork to file federally; for example, you’ll have to declare your agreement to operate as a cooperative and not a business if you file federally. To be eligible for federal incorporation, you’ll need at least three business members who are each at least 18 years old, of sound mind, and not bankrupt.

Financial Services Commission of Ontario (FSCO)

The FSCO regulates certain types of entities. In addition to overseeing cooperatives, they regulate insurance, pension plans, credit unions, trust companies, and mortgage brokers. They make sure your member-owners are protected, so you’ll likely encounter them for legal, audit, or regulation questions. If you decide to incorporate only in Ontario, information has to be submitted to the FSCO on a regular basis.

A Unique Approach to Fundraising

One thing to keep in mind about starting an Ontario cooperative is the unique way you have to get investors. Unlike a typical business, you aren’t able to offer stock or extra shares of ownership. Instead, you need to get people who are passionate about your purpose and intent on using your services. Once they put capital into your cooperative, they get paid back over time through profits of the cooperative. However, investors in cooperatives typically have the same rights as all other member-owners. If it’s in your bylaws to not allow member-owners to withdraw profits early, your investors should realize they may have to wait a while until they’ve made a profit.

It’s always exciting starting a new small business. A member-owner cooperative is especially exciting because your customers are usually more passionate about community and the company’s well-being. Take the right steps to start out by making sure a cooperative is the right entity for you, deciding how to incorporate, and making a fundraising plan.

Information may be abridged and therefore incomplete. This document/information does not constitute, and should not be considered a substitute for, legal or financial advice. Each financial situation is different, the advice provided is intended to be general. Please contact your financial or legal advisors for information specific to your situation.

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