The Co-op Development Path



Step 1: Assemble a group of interested people

  • Identify the needs to be met:
    • unavailability or instability of work,
    • unavailability of certain products and services,
    • poor quality of certain products and services,
    • products and services that are overpriced,
    • market development.
  • Identify professional assistance needed to launch the business:
    • co-operative developer,
    • feasibility study, business plan and financial consultant,
    • accounting consultant, legal consultant, others

Step 2: Conduct a pre-feasibility study

  • Conduct a preliminary market review
  • Identify available technical and financial assistance
  • Assess receptiveness to the co-operative business in the local community
  • Evaluate if the co-operative is the best legal framework to use or if the kind of co-operative selected is the most suitable
  • Define the intended benefits of the co-operative for members, (eg. quality, price) and characteristics:
    • products and services offered (consumers’ co-operative)
    • or products and services marketed (producers’ co-operative)
    • or salaries and working conditions (workers’ co-operative)
  • Evaluate the project’s potential to attract the minimum number of members required.

If this study is not conclusive, the group should re-evaluate its business idea. If this study shows that the planned co-operative is feasible, the group can proceed to the second phase.


Step 3: Hold an organizing meeting

  • Choose the corporate name of the co-operative and the location of its head office
  • Define the co-operative’s mission (objectives, purpose)
  • Elect a temporary board of directors and secretary to the board
  • Officially submit an application for incorporation as a co-operative from the provincial ministry responsible for co-operatives or from Industry Canada, if you are incorporating federally

Step 4: Conduct a viability study

  • Obtain financing for the viability study from such sources as:
    • internal financing by the members
    • special grant
    • and/or negotiate a technical assistance or business start-up agreement with a specialized organization.
  • Define the strategic objectives
  • Evaluate the various strategic scenarios, production costs, and human, material and financial resources necessary
  • Evaluate the various start-up financing scenarios
  • Do a preliminary projection of budgeted statements and of a cash budget (revenues and expenditures, investments by members in share capital, partners, credit union or bank loans, grants).

If this study concludes that, although the planned co-operative looks feasible it would not be financially viable, the group should consider terminating the project. If the study shows that the new co-operative will be financially viable, the group can proceed to the third phase.


Set up ad hoc committees to distribute the workload among the members of the temporary board of directors. For example:

  • planning committee
  • training committee
  • committee to draft by-laws

Step 5: Organize the association

  • Decide on the association’s structure and define the various categories of members, if necessary (consumers, suppliers, workers)
  • Determine the roles and responsibilities of the various democratic bodies (general meeting, board of directors, committees)
  • Establish the articles and by-laws
  • Recruit members
  • Organize and offer a program to train members in the administration and management of a co-operative, the chairing and running of annual meetings (eg. “parliamentary procedure”), the operation of a committee or board.

Step 6: Organize the enterprise

Step 6.A: Plan the operation of the enterprise

  • Draw up an organization chart of the enterprise
  • Do the operational planning for the first year of activities
  • Negotiate contracts for the supply of necessary products and services (inputs) and, as required, sales or marketing contracts (depending on the kind of co-operative and the nature of the enterprise)
  • Devise and implement an accounting system
  • Define the duties and responsibilities of each position
  • Develop a salary policy
  • Select and recruit the person to occupy the position of chief executive officer/general manager

Step 6.B: Plan and organize the enterprise’s start-up financing

  • Determine the value of the membership share to become a member
  • Determine the value of the share capital on start-up and during the first three years of operation (in terms of the expected growth in the number of members)
  • Prepare the preferred share by-laws (if applicable)
  • Prepare the loan by-laws (if applicable)
  • Draw up the overall financing plan for the first three years of operation
  • Draw up the business plan
  • Negotiate the capital contribution of external financial partners (if necessary); venture capital corporations, private funds or credit union investment programs
  • Apply for a government start-up grant (if they are available and if required)
  • Negotiate medium term credit union or bank loans and a line of credit

Step 6.C: Recruit and train the enterprise’s staff

  • Select and recruit employees (responsibility of chief executive officer, except in the case of a worker co-operative where recruitment decisions are usually made collectively)
  • Organize and offer a staff training program
  • Organize and offer a co-operative training program

Step 6.D: Ensure the legality of the enterprise’s operations

Take care of the legal formalities and obtain the legal authorization necessary to start up the enterprise’s activities:

  • federal: employer numbers for government discounts, for GST/HST) for, Canada Revenue Agency
  • provincial: numbers for the provincial revenue department, for provincial tax
  • co-operatives may also have to register with, or be licenced by, other legislation or federal or provincial departments
  • municipal: municipal permit, employer number, etc.

Step 7: Hold the initial general meeting

  • Adopt the by-laws
  • Adopt the business plan
  • Approve the co-operative’s membership in a sectoral federation or an intersectoral interco-operative organization
  • Appoint an external auditor
  • Elect the members of the board of directors, and of any other committees (if the general meeting has the power to do this)

Adapted from the AAFC & Industry Canada Guide to Creating a Co-operative. For more information, click here.