You’ve done the work – you’ve educated yourself about co-ops, decided it’s the right business structure for you, and you’re ready to reach out to advisors and partners who can help you get a co-op started.    

Unfortunately, business advisors, lenders, and other partners you reach out to may not be familiar with the co-op model – or worse, they might have long-held misconceptions about it. This can be frustrating and even prevent your co-op from moving forward.    

But you can prepare yourself for this by getting familiar with some misconceptions people may have about co-ops, so you can help debunk them. Here are three common ones we’ve encountered:   

1. All co-ops are non-profit  

As member-owned businesses, governed by boards of directors, co-ops look and sound quite a bit like non-profits. And, to be fair, over two-thirds of Canadian co-operatives do operate on a not-for-profit basis. So if you’re working with a lender, they may be reluctant to support your co-op or may try to direct you to programs designed for non-profit corporations.   

But many co-ops do generate profits, and they can issue dividends to their members.    

If you encounter this misconception about your for-profit co-op, get out your province’s Co-operatives Act. Like any piece of legislation, this won’t be fun to wade through, but find the parts that talk about issuing securities and allocating net surplus to show to your lender. These provisions mirror the processes set out for corporations, which will help convince them.   

It may also be helpful to show in your business plan how the co-op can secure loans, whether that’s by using property as collateral or some members personally guaranteeing debt repayment.    

2. All co-ops are for-profit   

That’s right – some people may believe the opposite! Many service providers, like granting agencies or companies that provide discounts to non-profits, often assume co-ops are all for-profit businesses. And, in some cases, there is good reason for this. In Alberta, for example, only housing co-ops are deemed to be not-for-profit, while all other co-ops operate similarly to for-profit corporations. This can be a challenge for co-ops trying to secure discounts on services or applying for grants to fund their start-up.    

If your co-op is non-profit, you may need to show your partner the sections of your articles and bylaws. In particular, you can highlight sections that deal with dissolution, allocation of surplus, share capital, purpose, and remuneration of directors. And, if you’re located in Manitoba, Saskatchewan, or British Columbia, registering as a community service co-operative certifies your organization as a non-profit co-op.    

3. Co-ops have a hard time making decisions   

Co-ops are member-owned businesses, and all members have an equal vote on key decisions. That principle leads some service providers to view a co-op’s decision-making process as slow and unnecessarily cumbersome.    

Co-ops are much more inclusive than other businesses, but that doesn’t mean they can’t streamline decision-making and stay nimble. Most co-ops will allocate operational and strategic decisions to their board or hire a management team to lead their day-to-day operations. If a partner is worried your co-op will slow down progress, consider inviting them to a board meeting or providing them with your bylaws or terms of reference to showcase your decision-making processes.    

Choose Your Path    

At Co-operatives First, we provide free online training to help demystify the processes of starting and running a co-operative. And for service providers, our Co-op Advisors course will debunk some myths about co-ops to help them better support co-op clients. So, whether you’re an entrepreneur, professional, or advisor, check out our Intro to Co-operatives course, choose your path, and start learning today.