Question

explain how a cooperative society is formed

Answer 1

STEPS IN FORMING A COOPERATIVE. The defining characteristic of a cooperative is that it is a business owned and controlled by the people who use its services. ... Producer cooperatives are formed by farmers, craftspeople and other producers to purchase supplies or services and to market products.

Answer 2

Establish a steering committee

In some cases, a group of people who share an idea for a cooperative forms a steering committee and develops a plan and a timetable for researching and developing a co-op. In other cases, an initial organizing group convenes a meeting of potential co-op members to test out the level of interest in the co-op idea. A steering committee is formed from participants in this meeting. The level of interest can be further tested by asking for an initial installment on a membership fee from those who are seriously interested in the co-op.

2. Conduct a feasibility study

The steering committee either conducts a feasibility study itself or hires a consultant to carry out the study. The purpose of a feasibility study is to examine critical opportunities and obstacles that might make or break the formation of the cooperative. These critical issues include the number and interest level of potential members; market issues (Can the co-op get better prices, better quality or better services than potential members currently get through other means?); operating costs; and availability of financing. If insurmountable obstacles are discovered in the feasibility study, the development of the cooperative can be abandoned or shelved before too much time or money has been expended.

In some cases, local or state governments or foundations may provide financial or technical assistance in carrying out a feasibility study. Initial payments by potential co-op members may also be used to help cover the cost of a feasibility study.

3. Draft Articles of Incorporation and Bylaws

In order to conduct business, a cooperative has to be incorporated under the appropriate state statute. Most states have statutes specifically for cooperatives; others have more general corporate statutes. The steering committee should select legal counsel to draft or review the articles of incorporation and bylaws. The articles of incorporation describe the kind and scope of the cooperative's business and must be filed with the secretary of state. The bylaws state how the cooperative will conduct business. A co-op can start out with very basic bylaws and refine them after the business plan has been developed.
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