There are two key legal elements to forming a corporation, the articles of incorporation and the by-laws. The articles include basic information, such as the name and address of the corporation, the corporate purpose, how much and what kind of stock the company will authorized, any restrictions on the transfer of stock, and the list of initial directors. Most people choose to define the corporate purposes broadly and keep the articles brief. Ordinarily, the details about the cooperative structure is reflected in the bylaws, which are not usually filed with state officials and are thus easier to amend. Amendments to the Articles require shareholder voting and the filing of Articles of Amendment and a fee to the state.
The purpose of the ICA Model Bylaws and sample Articles is to create a democratic cooperative structure within the legal shell of a general corporate, cooperative, or worker cooperative statute. Fortunately, most general business corporation statutes are flexible enough to use in creating a democratic worker cooperative. What this means is that using the ICA model by-laws, you can form a worker co-op in any state, regardless of whether they have a worker co-op statute or not. Time and again, people say that they can’t form a worker co-op because there is no law on the books – this is wrong! You can form a co-op in ANY state under the general corporation law. The only limitation is that, generally you can’t have the word “cooperative” in your legal name.
A number of states have a special statute exclusively for worker cooperatives, including Massachusetts, New York, Vermont, Connecticut, Maine, Ohio, and others. Most of these special worker cooperative statutes were modeled on the Massachusetts statute, drafted in the early 1980s by the ICA Group. Where such a law exists, a worker cooperative should incorporate under the worker cooperative statute, and the Model Bylaws will closely track the statutory guidelines. In other states, a worker cooperative may incorporate under the business corporation law or under the general cooperative corporation law, subject to any particular state law restrictions. The Model Bylaws will, in effect, convert a normal business corporation or cooperative corporation to a unique type of democratic worker cooperative with internal capital accounts.
Using ICA’s Model By-Laws, you can incorporate a worker co-op in ANY state. You do not need a worker co-op statute or even a co-op statute to form a cooperatively structured corporation.