How to start a worker co-op

In the age of unemployment, downsizing, and outsourcing, where can a poor soul find a job? Well, maybe it’s time we create our own. Self-employment is an option and can seem freeing, but it’s hard to do everything yourself and find time for a non-work life. The worker cooperative is an alternative to the isolation of self-employment and the exploitation that often comes with traditional jobs.

What is a worker co-op? 

It’s an enterprise owned, democratically controlled by, and operated for the benefit of, its workers. There are endless variations on co-ops, which means there are many questions to consider before forming your own unique venture. Remember, you are starting a real business and if  you’ve never started a business before, you will need support. 

Read up on how to start a co-op below, get advice from co-op development organizations, and talk to co-op friendly lawyers and accountants. You will need a business plan, cooperative-specific legal incorporation documents, and capital to finance the co-op in the beginning. Additionally, you will want an organization plan detailing how you will run your co-op cooperatively.

Are worker co-ops a new thing?

Big and small worker co-ops have a long and rich history in the US and internationally. The Rochdale Society of Equitable Pioneers established the Rochdale principles in 1844 and are considered the founders of the cooperative movement. Enslaved African Americans started practicing cooperative economics from the moment they were forcibly brought to the US. The first Rochdale-type Black cooperative was established in 1901 in Ruthville, Virginia.

Today, Mondragon Corporation in Spain is made up of over 90 cooperatives and employs over 70,000 people. In the Emilia-Romagna region in Italy, a majority of its 4.5 million residents belong to a worker co-op and co-ops support about 30 percent of the region’s GDP. As of 2021, there were 612 verified worker co-ops in the US, but the Democracy at Work Institute estimates that number is closer to 1,000 co-ops that employ about 10,000 people. 

Why start a worker co-op?

Worker co-ops can be more satisfying than working for “The Man”. Worker-owners aren’t forced into a hierarchy, and they have more say over what the business does than traditional employees. You still have to be responsible for managing a co-op, but your coworker-owners will likely be nicer and more understanding of your personal needs and quirks than middle-management at any corporation. 

You will probably make more money by cutting out the investors and managers. In typical low-paying industries, worker-owners can make several times what they were pulling in as employees. For example, in Petaluma, California, Alvarado Street Bakery worker-owners take home around $60k a year — a lot better than working for minimum wage. As a worker-owner, you are less likely to get laid off, both because co-ops prioritize steady employment over short-term profits, and because they are more sustainable than their conventional counterparts.

How to start a worker-co-op

This list is based on a paper from the U.S. Federation of Worker Co-ops.) 

1. Assemble the initial organizing group and information, then clarify needs.

• Forming the group

One of the first steps to starting a worker cooperative is finding others willing to be part of the initiating group. If you are converting a business into a co-op, you may already have your members.

• Identify and convene around 5-15 people with mutual needs and interest in creating a worker-cooperative.
• Individuals should be available for weekly or bi-weekly meetings and able to devote substantial time to completing necessary research.
• Inventory the skill sets and experiences of the group in order to assess roles and tasks.
• Choose roles and assign tasks.

• Collect necessary information, materials, and data. 

• Carry out market research to determine viability of the business proposition.
• Investigate legalities of converting or creating a co-op.
• Identify your legal structure: LLC or cooperative corporation?
• Decide where initial funding will come from:
  • Worker-owners and/or a loan from the former owner;
  • A loan from a bank (try one that has loaned to co-ops successfully); 
  • Or a grant for worker co-op start-ups.

2. Convene initiating group to assess moving forward.

• Members meet to discuss, plan, and organize next steps. 

• Review all collected materials, allowing time for discussion, then vote on moving forward (or not).
• Choose key decision-making processes and governance structures.
• Set up committees to work on preparing the business plan and raising funding.

3. Incorporate your business, create by-laws, and initiate funding.

• Outline the purpose (mission) of your business, overview of goods and services, organizational structure, and define the process by which new worker-owners will be allowed to join.
• Finalize all legal documents.
• Secure membership and funding.

4. Launch your new worker-cooperative!

• Begin operations by opening your doors and putting your business plan into action.

While this sounds like a lot of work (and it is), worker-owners I’ve talked to say that, in the long run, it’s totally worth it. There are resources listed below to help you get started, including worker co-op development organizations. 

Starting a new co-op can create jobs — not just for you, but also for people who may have never had the opportunity to own a business or earn a living wage. Worker co-ops are part of a larger movement to create an economy that is democratic, just, and takes care of everyone. And it can start with you and your co-workers.

Resources

Worker-Coop Development Organizations:

• The U.S. Federation of Worker Cooperatives
• The National Cooperative Business Association
• Sustainable Economies Law Center 
• Canadian Worker Co-operative Federation
• International Cooperative Alliance

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Originally written as an essay by Mira Luna in July, 2011. This guide was updated and reformatted by Jennifer Foley on July 31, 2024.

The original essay appears in Shareable’s paperback Share or Die, published by New Society and available from Amazon. Share or Die is also available for Kindle, iPad, and other e-readers. For the next article in Share or Die, Astri and Liz’s “Get on The Lattice,” click here.

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