Many small businesses have been hurt or even destroyed by the COVID-19 pandemic. Owners may have lost their business and their funds. One of the legal tools that can help some owners recover is the business cooperative, or “co-op.”
Co-ops are organizations in which people or businesses band together to help themselves. Usually the co-op seeks to complete a task or function better or less expensively or with more control over the process, than members could accomplish individually. Our business and social communities have countless examples of co-ops. Here are a few:
Businesses facing challenges due to the pandemic as well as people who lost a business or lost a job and lack funds to restart, might consider whether it is possible with like-situated businesses or like-minded business associates, co-workers, or acquaintances to restart in the form of a co-op.
Co-ops have a long history. They are generally guided by some basic principles. According to the National Cooperative Business Association, some of those basic principles are:
Today some of the largest business organizations in the United States are cooperatives. Agricultural products are processed, water and power are generated, and telephone communications are transmitted or managed by huge cooperatives.
Many readers will recognize the names Ace Hardware, REI sporting goods stores, Land O’Lakes dairy products, Sunkist brand citrus, Ocean Spray cranberry products, FTD Florists, Northwest Mutual Life Insurance, the Associated Press, and almost every local credit union. These organizations are co-ops.
Their missions are not to generate a profit as such, but to benefit their members. Generally, if they have profits, they return them to the members based on patronage. They generally ascribe to the above principles. For businesses, joining together as a co-op can provide economies and bargaining power for consolidating space, collectively providing services, or contracting to buy supplies or merchandise or services.
A co-op can negotiate better terms with suppliers of goods or services like insurance, advertising, product storage or myriad other services and business needs. For manufacturers and producers, a co-op may enable a group of companies to consolidate and better manage some distribution functions. Independent restaurants might collaborate to consolidate purchasing, leasing of facilities, delivery service or other operations.
By joining together with other knowledgeable persons similarly situated, those damaged by the scourge of the pandemic may be able to achieve a fresh start in business by pooling their collective knowledge and financial resources.
A co-op organization may be an appropriate and particularly useful business model in the era of COVID-19.