Worker Co-op Formation Guide

What is a Worker Co-op?

A worker cooperative is a business owned and democratically controlled by its employees. Key principles:

• One member, one vote: Not one share, one vote
• Profit-sharing: Distributed based on hours worked or patronage
• Member ownership: Workers own equity, not external shareholders

Why Co-ops?

• Resilience: 3x survival rate vs. conventional startups (Québec data)
• Equity: Average wage gap (highest/lowest) is 3:1 vs. 300:1 in corporations
• Community wealth: Profits stay local, not extracted to distant shareholders

Reset Phase 2: Co-ops are the ownership infrastructure. Scaling to 2,000 by year 10 redirects $5-10 billion from speculation to worker wealth.

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Legal Structures in Canada

Co-operatives Act (Federal)

• Best for: Interprovincial/international co-ops
• Incorporation: Canada Business Corporations Act
• Requirements: Min. 3 founding members, bylaws, articles of incorporation

Provincial Co-op Acts

Most co-ops incorporate provincially:

Legal Advice: Budget $2,000-5,000 for lawyer familiar with co-op law (often subsidized via Canadian Worker Co-op Federation).

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12-Month Formation Timeline

Months 1-3: Feasibility & Planning

1. Assemble Founding Team (3-7 people):

   • Shared vision + complementary skills (operations, finance, marketing)
   • Commit to democratic decision-making

2. Choose Your Sector:

   • High-potential: Tech, retail, food service, care work, skilled trades
   • Research: Market size, competition, customer base

3. Feasibility Study:

   • Revenue model: How will you make money?
   • Startup costs: Equipment, rent, inventory ($10K-$100K typical)
   • Breakeven: Month when revenue > expenses
   • Use CWCF's feasibility template

4. Governance Structure:

   • Board: Elected by members (3-9 people); 1-year terms
   • Committees: Finance, membership, operations
   • Decision-making: Consensus for major votes; majority for routine

Months 4-6: Legal Incorporation & Financing

5. Incorporate:

   • File articles with provincial registry ($200-$500)
   • Draft bylaws (template from co-op association)
   • Key clauses: Membership criteria, profit distribution, dissolution

6. Raise Startup Capital:

   • Member equity: Each founding member invests $500-$5,000 (becomes their ownership share)
   • Co-op development funds:
     • CWCF JEDDI: Up to $50K grants for worker co-ops
     • Québec: Régional solidarity co-ops (RLS) provide $10K-$100K loans
     • Credit unions: Vancity, Desjardins offer co-op-specific loans (5-7% interest)
   • Crowdfunding: Ethical sites like Supportiv.com (avoid VC/equity crowdfunding)

7. Business Plan:

   • 3-year projections: Revenue, expenses, cash flow
   • Hire consultant if needed ($1K-$3K; subsidized via CWCF)

Months 7-9: Operations Setup

8. Secure Location:

   • Rent: Negotiate lease (include co-op clause for transfer rights)
   • Consider co-working spaces or shared facilities initially

9. Hire/Recruit Members:

   • Member-workers: Employed + own equity (probationary period: 6-12 months before full membership)
   • Non-member workers: Temporary or specialized roles (max 25% of workforce per co-op best practices)

10. Systems & Tools:

    • Accounting: QuickBooks, Wave (free for small co-ops)
    • Payroll: ADP, Wagepoint (handle CPP, EI deductions)
    • Governance: Loomio (free decision-making tool)

Months 10-12: Launch & Stabilize

11. Soft Launch:

    • Test products/services with friends, family, allies
    • Gather feedback; iterate

12. Public Launch:

    • Marketing: Website, social media, local press
    • Emphasize co-op values: "Worker-owned. Community-focused."

13. First General Assembly:

    • Quarterly or annual meeting of all members
    • Review financials, elect board, vote on major decisions

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Governance Models

Consensus-Based (Best for <10 members)

• All major decisions require unanimous consent
• Pros: Inclusive, builds trust
• Cons: Slow; one person can block progress

Majority Vote (Best for 10-50 members)

• 50%+1 for routine decisions; 66% for bylaws, dissolution
• Pros: Faster; democratic
• Cons: Can marginalize minority views

Delegated (Best for >50 members)

• Board handles day-to-day; members vote on annual budget, board elections
• Pros: Scalable
• Cons: Requires strong accountability mechanisms

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Profit Distribution

Patronage Model (Most Common)

• Surplus (profit) divided based on hours worked or seniority
• Example: $100K surplus, 10 members, 20,000 hours total → $5/hour bonus

Equal Distribution

• Each member gets equal share
• Pros: Simple, egalitarian
• Cons: Doesn't reward high performers; can demotivate

Hybrid

• 50% equal, 50% patronage
• Balances equity and merit

Tax Advantage: In Canada, co-ops can deduct patronage dividends as expenses (lowers corporate tax).

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Sector-Specific Case Studies

Tech: Hypha Worker Co-op (Toronto)

• Founded: 2019 | Members: 7 | Revenue: $500K/year
• Services: Web development, digital infrastructure
• Model: Consensus governance, equal pay ($80K/year)
• Success Factor: Niche in ethical tech (privacy, open-source)

Retail: La Siembra Co-op (Ottawa)

• Founded: 1999 | Members: 30 | Revenue: $5M/year
• Product: Fair-trade chocolate, coffee
• Model: Board-managed; profit-sharing (20% of salary)
• Success Factor: Mission-aligned customers (cafes, universities)

Care Work: Cooperative Home Care Associates (Bronx, NY—model for Canada)

• Founded: 1985 | Members: 2,000+ | Revenue: $60M/year
• Services: Home health aides
• Model: Large-scale worker co-op; union contract
• Success Factor: Public contracts (Medicaid); training programs

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Financing Options

Avoid: Venture capital (demands exit/IPO); angel investors (dilute democratic control).

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Common Pitfalls (And How to Avoid)

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FAQs

Q: Can I convert an existing business to a co-op?
A: Yes! Succession co-ops are common (retiring owner sells to employees). Use Project Equity's toolkit.

Q: How do I fire a member?
A: Bylaws should include termination clause (e.g., 66% vote after warning). Legal advice required.

Q: What if members disagree on major decisions?
A: Mediation first (CWCF offers services). If irreconcilable, dissolution clause in bylaws.

Q: Can co-ops scale?
A: Yes. Mondragon (Spain) has 80,000 worker-owners; Québec has 200-person co-ops. Requires strong governance.

Q: Do co-ops pay taxes?
A: Yes—corporate tax (lower rate for small biz); members pay income tax on wages/dividends.

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Next Steps

1. Attend a Workshop: CWCF training calendar
2. Join a Co-op Hub: Québec: CQCM | Ontario: Ontario Co-op Association | BC: BCCA
3. Get Legal Help: Find co-op lawyer via CWCF directory
4. Apply for Funding: CWCF JEDDI grants
5. Report Your Co-op: Track via 99reset.org/join

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Resources

• Canadian Worker Co-op Federation: canadianworker.coop
• Feasibility Study Template: CWCF Resources
• Québec Model: CQCM
• US Examples (adapt for Canada): Democracy at Work Institute

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Last Updated: November 2025
Difficulty: Hard (12-18 months)
Impact: Very High (permanent ownership shift)

Questions? Email info@99reset.org or find mentors in your local chapter.