Business Financing

Everything Entrepreneurs Need to Know About a 'Cooperative Business Model'

cooperative business model

If you run a retail, agricultural, or healthcare-related small business, you might already be familiar with the cooperative business model.

For entrepreneurs just getting started in these industries, a cooperative (sometimes referred to as a “co-op”) is an organization run by an elected board of directors that is operated to benefit those that use its services. Members of a cooperative vote to control the direction the organization goes in and whatever profits and earnings a cooperative generates are distributed among its members.

Much like forming an LLC or Corporation, a cooperative business model faces many similar requirements during the filing process. However, there are also many differences due to the nature of the entity and the role its members play. Here’s a look at the similarities and differences shared in forming a cooperative.

Similar to an LLC or Corporation, a cooperative needs…

· Articles of Incorporation, which are also known as Articles of Organization. These documents are required by the state your business is filed in and includes information like the cooperative’s name, location, dates in business, purpose, and structure.

· Bylaws, which are internal documents necessary to operate the cooperative.  Some of the topics covered in bylaws include how members are elected, how meetings and operational procedures are organized, a summary of duties, and requirements for membership.

· Licenses and permits, which will vary depending on the state you’re in.

Unlike an LLC or Corporation, a cooperative needs…

· A strategy. Members meet together beforehand to discuss needs the cooperative will fill and all aspects of the business plan. Every member must mutually agree upon these decisions together before proceeding forward.

· Membership applications. Want to bring on new members for your cooperative? A membership application must be established ahead of time with necessary information including the names of members, their rights and benefits, and signatures from the board of directors.

· A charter member meeting. The board of directors is appointed during this meeting along with discussion and voting to adopt bylaws created earlier.

Due to its niche nature, a cooperative may not be an option every entrepreneur can embrace for their business. It also faces the difficulties of appealing to investors that seek a financial return with a slower cash flow and “one member-one vote” philosophy which applies to all members regardless of how much involvement or investment they put into the cooperative.

However, a cooperative business model still has plenty of advantages to offer if you feel like it might be the best fit for your needs. The structure operates on a democracy with every member getting the right to their vote and no one vote outweighing another. It’s also inexpensive to register with members taxed only once on their income from the cooperative, and members are free to join or leave with the entity needing to file for a dissolution as a result.


Deborah Sweeney is the CEO of MyCorporation is a leader in online legal filing services for entrepreneurs and businesses, providing start-up bundles that include corporation and LLC formation, registered agent, DBA, and trademark & copyright filing services. MyCorporation does all the work, making the business formation and maintenance quick and painless, so business owners can focus on what they do best. Follow her on Google+ and on Twitter @mycorporation.

Please note that KPMG Spark’s sponsorship of this blog article is not intended to address the specific circumstances of any particular individual or entity and does not constitute an endorsement of any entity or its products or services. This content represents the views of the author, and does not necessarily represent the views or professional advice of KPMG Spark.

How to Achieve Cap Table Success

If you’ve ever started a business or invested in a business then you probably know the importance of a cap table. As a quick refresher, a company’s cap table is a spreadsheet that shows how the ownership of the company is divided among the founders and investors. Basically, it says who owns what percent of the company.

As a founder, the cap table plays a crucial role in growing your personal wealth. It holds the key to how much you get when it’s time to cash out on the business. Even if you start and grow a business worth millions of dollars, you could receive very little in the end if you don’t manage your cap table well.

Taking care of your cap table and making smart ownership decisions should be just as important to you as building a great company. Here are 3 tips to help you accomplish cap table success.

Start Early

Too often we hear about entrepreneurs that are so excited about starting their business that they forget the importance of organizing their cap table.  Soon enough they have to face the reality. As the company grows, everyone involved begins to shuffle for a piece of the pie.

If ownership hasn’t been worked out beforehand, this can lead to drama and legal issues. As soon as you begin your company, it’s important to start thinking about how to divide ownership fairly. Organize a cap table and record these decisions early on to avoid future headaches and to position your company for long term success.

Record everything

Accurate record keeping is essential for your cap table. The last thing you want on your cap table is an error.

Any error on your cap table will end up costing you, one way or another. From legal fees to incorrect allocation of money, these errors are better just to avoid all together.

You need to track every single transaction on your cap table. And as stated above, make an effort to do this from the very beginning. This might seem obvious, but you’d be surprised at how many cap tables have errors. Sometimes it’s a math error, other times there is information that is inaccurate or simply missing.


In the past, there were pretty much only two options for managing your cap table. You could either hire expensive lawyers and accountants to do it for you, or you could try to do it yourself.

It may seem easy enough to handle your cap table by yourself. There are definitely some great spreadsheet templates out there to get you started. But even these are very limited.

As your company and cap table mature, it will become too complicated for a spreadsheet. You will need to keep track of option exercises, cancellations, terminations, sales, transfers, and more. Frankly, it becomes messy and time consuming, and there is greater room for costly mistakes.

Luckily, we live in a world of user-friendly business automation software, and that includes cap table management. Now there is handy software with expert support, such as Capshare, to help you keep management of your cap table under your fingertips without being left in the dark.


Your cap table needs to looked after with the same care that you give your growing company. Maintaining a cap table may seem like a daunting challenge, but it doesn’t have to be, due to helpful software. Don’t delay getting started or recording important transactions. Keeping up with your cap table now will lead to less problems down the road and a larger payoff in the end.

How Business Credit Can Affect Your Business


Like your personal credit, your business has its own credit scores too—scores that can help (or hurt) you in a number of ways. Thus, it’s best to know what they are and how they can affect you.

How can business credit help me?

A good business credit score can help you secure better interest rates on loans, decrease instances where you need to prepay for a specific product or service, and secure better trade terms with important suppliers in your industry.

Let’s say you’re looking to start a hair salon. You plan on purchasing salon equipment, such as expensive styling chairs and supply trolleys. In addition, you’ll need to keep consistent inventory of hair products. How do you plan to buy all this equipment and inventory?

Maybe you have money saved up or generous friends and family that are willing to help out. In the likely case that that doesn’t cover all your expenses, keep in mind that lenders and suppliers need a means of determining how well your business repays debts before they will approve you for financing or favorable payment terms. This is where business credit scores come in. A lender can check your business credit report and/or pull your business credit scores to see how likely you are to make on time payments.

Whether it’s equipment and inventory for a hair salon, construction materials for a home repair company, medical supplies for your office, etc., startup costs, expansion costs, and general running-your-business costs can add up to much more than expected. Having good business credit scores can be your best bet for securing financing options you can afford, or simply keeping your business afloat when the costs pile up or cash flow fluctuates.

What is a business credit score?

Just like personal credit, there are a few big credit reporting agencies collecting information about your business credit. Each agency can have different information on file for the same business, which means they are creating a different business credit report and calculating a different score for your business. Three of the most notable business credit scores are:

Dun and Bradstreet PAYDEX Score, used by suppliers and vendors to determine your payment terms. Scores range from 1 to 100, higher scores indicating better payment performance.

The Intelliscore Plus℠ from Experian, used by lenders to determine the likelihood of delinquency over the next 12 months. Again, scores range from 1 to 100.

FICO® LiquidCredit® Small Business Scoring Service℠, used by the SBA to pre-screen applications for commercial loans under $350,000. Scores range from 0 to 300, where the minimum score to pass the SBA’s pre-qualification is currently 140.

Top tips to improve your business credit scores

It’s tough to add another thing to the list of what you need to take care of as a business owner. Fortunately, taking care of your business credit is similar to taking care of your personal credit. Here are a few things you can do now to keep your business credit reports and scores in check:

Pay bills on time. Pay early if you can! To score a 100/100 on your PAYDEX score, you’ll have to consistently pay early.

Open multiple credit accounts, such as a business credit card, a line of credit, or loan. Use only your business accounts for your business expenses to ensure that you keep your business and personal finances separate, and try to keep your balances under 25% of the available credit line.

Maintain good relationships with your suppliers and vendors, and check to see if they report to business credit reporting agencies so that your positive payment history is being reflected in your business credit report.

Check your reports for errors or derogatory remarks. 25% of small business owners have reported significant errors on their business credit reports. If you find an error, be sure to request a correction from the reporting agency.


Gerri Detweiler is Head of Market Education for Nav, which provides business owners with simple tools to build strong business credit. Her articles have been widely syndicated, and she writes a column for She is also the coauthor of Finance Your Own Business: Get on the Financing Fast Track.

Please note that Bookly’s sponsorship of this blog article is not intended to address the specific circumstances of any particular individual or entity and does not constitute an endorsement of any entity or its products or services. This content represents the views of the author, and does not necessarily represent the views or professional advice of Bookly.