If you’re looking to start a business in Ontario, you may want to consider forming an Ontario co-operative corporation.
Co-operatives are unique in that they are member-owned and controlled, operating on democratic and financial principles. In Ontario, co-operatives are governed by the Co-operative Corporations Act, which sets out the rules for how they must operate.
While the co-operative corporation business structure has its advantages, it may not be the best fit for every business. In the following paragraphs, we’ll explore the pros and cons of this unique business structure and answer some frequently asked questions.
- Ontario Co-operative Corporations are member-owned and controlled businesses that operate on democratic and financial principles.
- Members share in the profits and have equal say in how the business is run.
- Co-operative corporations may be a good fit for businesses that prioritize community involvement and democratic decision-making.
What is an Ontario Co-Operative Corporation?
A co-operative is a business model where people come together to meet a common need, be it economic, social, cultural, environmental, or all of the above.
An Ontario Co-operative Corporation is incorporated under Ontario’s Co-operative Corporations Act, which defines what a co-operative is and how it must operate. The principles and methods of a co-operative corporation are organized, operated, and administered with the following in mind:
- Each member or delegate has only one vote, regardless of the amount of money invested by the member.
- No member or delegate may vote by proxy.
- Surplus earnings are allocated among members on the basis of use of the co-operative’s services or products.
- Members contribute to the capital of the co-operative.
An Ontario Co-operative Corporation is different from a regular corporation or partnership. In a regular corporation, the shareholders own the business and elect a board of directors to make decisions on their behalf. In a partnership, two or more people own the business and share in its profits and losses.
In contrast, an Ontario Co-operative Corporation is owned and controlled by its members. Members have an equal say in the decisions made by the co-operative and share in the profits based on the amount of business they do with the co-operative.
To learn more about Ontario Co-operative Corporations, you can refer to the Ontario Co-operative Association website.
Structure and Governance of an Ontario Co-Operative Corporation
If you’re interested in starting an Ontario Co-operative Corporation, it’s important to understand the structure and governance of these unique organizations. Co-ops are member-owned and democratically controlled, which means that every member has a say in how the co-op is run.
The first step in understanding the structure of an Ontario Co-operative Corporation is to understand membership. Co-ops are owned and controlled by their members, who have equal voting rights regardless of the size of their investment. Members elect a board of directors to oversee the co-op’s operations and make strategic decisions on behalf of the membership.
Board of Directors
The board of directors in a co-op is responsible for the overall direction of the co-op. They set policies, approve budgets, and make strategic decisions on behalf of the membership. Board members are elected by the membership and serve for a specified term. They are responsible for ensuring that the co-op is operating in accordance with the Co-operative Corporations Act and the co-op’s bylaws.
Officers and Committees
The board of directors may appoint officers to manage the day-to-day operations of the co-op. This may include a general manager, treasurer, and secretary. Committees may also be appointed to oversee specific areas of the co-op’s operations, such as finance, marketing, or membership.
Every Ontario Co-operative Corporation must have bylaws that outline the rules and regulations governing the co-op. Bylaws typically cover topics such as membership, governance, meetings, and finances. Bylaws must be approved by the membership and filed with the Co-operative Corporations Branch.
Annual General Meeting
Every Ontario Co-operative Corporation must hold an annual general meeting (AGM) to report on the co-op’s operations and financial performance. At the AGM, members elect the board of directors and approve the co-op’s financial statements. The AGM is an important opportunity for members to engage with the co-op’s leadership and have their voices heard.
For more information on the Co-operative Corporations Act and the governance of Ontario Co-operative Corporations, refer to the Guide to the Ontario Co-operative Corporation Act provided by the Ontario Co-operative Association.
Pros & Cons of the Co-Operative Corporation Business Structure
Here are some pros and cons of the co-operative corporation model to help you make an informed decision:
One of the main advantages of a co-operative corporation is that it is owned and controlled by its members. This means that members have a say in how the business is run, and decisions are made democratically. This can be a great advantage if you’re looking for a business structure that allows you to have more control over your business.
Another advantage of a co-operative corporation is that it offers limited liability protection to its members. This means that members are not personally liable for the debts and obligations of the co-operative. This can be a great advantage if you’re concerned about protecting your personal assets.
Co-operative corporations are eligible for certain tax benefits that are not available to other types of businesses. For example, co-operatives are exempt from paying federal income tax on their surplus earnings if they meet certain criteria. This can be a great advantage if you’re looking for ways to reduce your tax liability.
Limited Access to Capital
One of the main disadvantages of a co-operative corporation is that it can be difficult to raise capital. Because co-operatives are owned and controlled by their members, they cannot sell shares to the public. This means that they must rely on their members to provide the necessary capital. This can be a disadvantage if you’re looking for a business structure that allows you to raise capital from external sources.
Limited Growth Potential
Another disadvantage of a co-operative corporation is that it can be difficult to grow the business beyond a certain point. Because co-operatives are owned and controlled by their members, they may be hesitant to bring in outside investors or take on debt. This can limit the growth potential of the business.
Co-operative corporations are subject to certain legal requirements that can limit their flexibility. For example, they must have a certain number of members and cannot distribute profits to non-members. This can be a disadvantage if you’re looking for a business structure that allows you more flexibility in how you run your business.
In summary, a co-operative corporation can be a great business structure if you’re looking for member control, limited liability, and tax benefits. However, it may not be the best choice if you’re looking for access to external capital, unlimited growth potential, and flexibility. Consider your business goals and needs carefully before deciding whether a co-operative corporation is the right choice for you.
- PDF Guide to the Ontario Co‑operative Corporation Act
- PDF Co operatives are Different from Business Corporations
- Business structure: Which one is right for you?
Frequently Asked Questions
What are some examples of successful co-operative corporations in Ontario?
Ontario has a long history of successful co-operative corporations. Some notable examples include The Co-operators, a national insurance provider, Gay Lea Foods, a dairy co-operative, and Mountain Equipment Co-op, a retail co-operative specializing in outdoor gear. These co-operatives have been able to thrive thanks to their focus on democratic decision-making, member ownership, and community involvement.
What are the differences between a co-operative corporation and a regular corporation in Ontario?
The main difference between a co-operative corporation and a regular corporation in Ontario is the way they are owned and governed.
Co-operative corporations are owned and controlled by their members, who each have an equal say in how the business is run, regardless of the amount of money they have invested. Regular corporations, on the other hand, are typically owned by shareholders who vote based on the number of shares they hold.
Co-operative corporations also follow a set of guiding principles, such as voluntary and open membership, democratic member control, and concern for community, that regular corporations do not necessarily follow.
Who is responsible for regulating co-operative corporations in Ontario?
Co-operative corporations in Ontario are regulated by the Financial Services Regulatory Authority of Ontario (FSRA). The FSRA oversees the incorporation and registration of co-operatives, as well as their ongoing governance and compliance with the Co-operative Corporations Act. The Ontario Co-operative Association (OCA) also provides support and resources to co-operatives in the province.