Overview of Worker Cooperative law in Colorado

Colorado attorney Linda Phillips provides an overview of the worker cooperative as a business model, including how these cooperatives are formed and tax advantages.  Via the Rocky Mountain Employee Ownership Center.

In Colorado, cooperatives generally are formed under Title 7 of the Colorado Revised Statutes, Articles 55 and 56. The statutes were revised in 1996 to allow for increased flexibility by the incorporators forming cooperatives. Cooperatives may be formed for any lawful business purpose. They may be organizations with or without stock and may have differing classes of membership. The definition of a “cooperative” is similar in both Articles 55 and 56. Article 56 states a cooperative is an entity having the following characteristics:

1) the business is operated at cost by adjusting prices or by returning net margins on a patronage basis to members and patrons;

2) dividends on stock or interest on equity capital are limited;

3) voting rights are limited to members of the cooperative;

4) business is carried on for the mutual benefit of the members; and

5) members are not liable for any debt, obligation, or liability of the cooperative.

In lay terms, a cooperative is an organization formed by a group of people, for their mutual benefit, and with a common purpose, such as group marketing activities, group purchasing, or as the employee–owners of a company. A cooperative is an organization where the members have a say in the governance of the company and is, in some ways, similar to a family-owned business.

A worker cooperative has all of the characteristics mentioned above, but it is formed and operated by the employees of a company for their mutual benefit—essentially jobs. Worker cooperatives are located throughout the United States, from Massachusetts to California and from Minnesota to Texas. The employees democratically control the management and operations of the company, with each employee–owner having an equal vote. These cooperatives may be formed in Colorado under Article 56 of Title 7, because the statutes allow formation of a cooperative for any business purpose. The 2011 Colorado Legislature passed a new cooperative statute called the Uniform Limited Cooperative Association Act (ULCAA), which would also allow formation of a worker cooperative.