Co-ops are different from other corporations. How they are different is generally found in the way they make decisions, interact with their owners, share profits, and raise capital. Choosing a business structure — and the right one — is key to a successful operation.

To assess whether a co-operative structure is right for your business, try this short questionnaire.

NOTE: If you’re not familiar with the different options for how to structure your business, check out our business model comparison.

The questionnaire for choosing a business structure

For the following questions, choose a, b, or c for the answer that best fits your situation.

1. Why do you want to create this business?

• 1. To benefit shareholders by providing goods or services (e.g. faster internet).
  2. To benefit shareholders by giving them a direct return on their investment (e.g. percentage of earnings).
  3. To help my community (e.g. house the homeless).

1. How do you want decisions to be made about your business?
   1. Every shareholder should get a vote.
   2. Shareholders that invest more money should get more votes.
   3. Certain stakeholders or stakeholder groups should have a greater say than others.

3. What do you want your business to do with its profit?
   1. Profit should be distributed to its owners based on how much they use its services.
   2. People that invest more money should get a bigger share of profit.
   3. Profit shouldn’t be given to owners; it should be used by the business.

4. Who should oversee the operations of the business?
   1. An elected board should oversee operations.
   2. Investors – often those who invest the most – should appoint a board to oversee operations.
   3. Board members should be elected or appointed based on qualifications and fit, and have no direct ownership of the organization.

5. If the business needs money, how do you think should it raise funds?
   1. Investment, fundraising, and/or debt.
   2. Investment and/or debt.
   3. Fundraising, grants, debt and/or donations

6. Who should own the business?
   1. The people or businesses that use its services.
   2. The people willing to invest.
   3. The community.

If you chose mostly ‘a’s, a co-op is a good fit for your business idea. A corporation or partnership model may be your best option if you mostly chose ‘b’. If most of your answers are ‘c’, think about using a non-profit corporation, charity, or community service co-op model.

How you answered questions 1 (Why do you want to create this business) and 3 (How should profits be distributed) are very important in determining a corporate structure. If you answered “a” for both, you probably have a great co-op business idea.

Co-operatives provide a different, and sometimes better, way of doing business – but they are not the right option in every situation. How you want your business to make decisions, handle profits, raise money, and interact with its owners, should determine whether a co-op is right in your situation. Contact us if you are still not sure if the co-op model is best for your idea.

If you enjoyed this tool on choosing a business structure, then you’ll like our article on doing a business model canvas.

1 people found this useful.