This section provides supporting information to help you understand different organisational types whilst you are reviewing the options for your co-operative’s legal form.
See also your legal & governance options explained.
Organisational type simply refers to the way in which your organisation wishes to be described, such as a co-operative, community enterprise or employee-owned business. However, in the eyes of the law an organisation is identified purely by its legal form.
The following is a list of the main organisational types and their characteristics. More information on organisational types can be found in Simply Legal.
Types of co-operative
There are many different types of co-operative business but broadly speaking a co-operative model is suitable where you want members – be they the consumers, workers or users of the service – to own and be involved with the business.
As there is no separate co-operatives act in the UK, co-operatives are defined as organisations which meet co-operative principles set out by the International Co-operative Alliance (ICA - the global federation of co-operative enterprises).
The main types of co-operative found in the UK are described on this page. Co-operatives can register using a variety of legal forms: most are co-operative societies or companies but some are community interest companies or limited liability partnerships.
Suitable where farmers want to work together, commonly in the following ways:
- marketing co-operatives, sometimes known as the ‘agency model’ because the co-operative acts on behalf of its members to market their produce; or
- requisite co-operatives which are mainly concerned with supplying agricultural products and services; or
- service co-operatives which provide services to support a farmer’s business, such as sharing machinery.
Suitable if you are a group of people belonging to a particular community and wish to start a business that you will own and control. Your community can be geographical (for example, a village shop) or a community of interest (for example, a renewable energy co-op). A community co-operative will normally carry out activities that are of benefit to the whole community, or a large part of it.
Consumer (or Users') Co-operative
Suitable if you want to start a business where the customers – the people who buy from the business – want to own and control it. At a minimum, customers who choose to become members are involved in the co-operative by buying from it, but they can also be involved in guiding how the co-operative is run, for example by being a board member.
Suitable if you are an independent businesses, organisation or individual and wish to collaborate to enhance trade or reduce costs. Members of a co-operative consortium work together on key activities such as leasing premises, buying equipment, marketing the members’ products and services and by forming agencies (for example, actors and doctors).
A form of financial co-operative owned and controlled by people who use the services provided. Members are involved by saving with and borrowing from the credit union.
A number of co-operatives are involved in owning or renting housing for their members. Housing co-operatives can be either fully mutual (where all tenants are members of the co-operative and vice versa) or non-fully mutual (which can have a wider membership base).
There are several different types of housing co-operative:
- Ownership housing co-operatives
- Leasehold housing co-operatives
- Tenant management co-operatives
- Short-life housing co-operatives
- Self-build co-operatives
- Community Gateway
- Tenant controlled housing associations
Suitable where members – individuals or organisations – may have a different relationship with the co-operative, employee, user, consumer but share a common interest in supporting a particular geographical community or community of interest.
Suitable where a number of co-operatives want to carry out joint activity. The major difference with a secondary co-operative compared to other co-operatives is that voting can be based on the contribution or trade of the members, allowing a move away from the principle of ‘one member, one vote’. However, certain restrictions do apply as the regulator is likely to order that a maximum voting strength is introduced to make sure that no member has an overall majority vote
Suitable where you want to create a business which is owned and run by its employees. At a minimum, employees who become members are involved in the co-operative by working for it, but they can also be involved in guiding how the co-operative is run. Some worker co-operatives are managed on a collective basis, where all employees will be members and will also be committee members or directors. Other worker co-operatives are managed through a smaller committee or board of directors that is democratically elected by and from the employee members.
Other organisational types
Some of these additional types can be described as co-operatives under certain conditions.
An organisation that exists to benefit the public, or a section of it, by promoting certain purposes that the law recognises as charitable. Being a charity offers a status recognised in law that is in addition to an organisation’s legal form and organisational type. An organisation cannot simply be a charity, it must first establish itself using an appropriate legal form before the status can be applied for.
The term ‘club’ can be used in a wide range of circumstances, including describing what might otherwise be an association, but a members’ club will generally be run following the co-operative principles. People join a club because they want to use the services offered and will usually pay a subscription every year plus the price of any food and drink purchased. A members’ club would not normally be eligible for charitable status unless all the members are considered charitable beneficiaries (such as some youth clubs). Most are registered as friendly societies, or as societies, although it is possible to register a club as a company.
Community amateur sports club (CASC)
Suitable for an amateur sports club, which must meet certain requirements to be formally registered with HM Revenue & Customs as a CASC, instead of applying to become a registered charity.
The particular benefits of registering as a CASC include:
- 80% mandatory business rate relief;
- exemption from corporation tax on trading income up to £30,000 and income from property up to £20,000; and
- benefits from Gift Aid donations.
CASCs can register as associations but most are societies or companies. For further details see www.cascinfo.co.uk.
Community development finance institution (CDFI)
CDFIs provide a financial tool for social, economic and physical renewal in under-invested communities. They lend and invest in deprived areas and markets that cannot easily access mainstream finance. They serve different types of customers including individuals, small and medium sized enterprises (SME) and social businesses. CDFIs can operate under a variety of legal forms including companies and societies. Some have individual and organisational members who invest in the schemes, while others receive grant funding.
For further details see www.responsiblefinance.org.uk.
Community land trust
The following is the official definition of a Community Land Trust, as found in the Housing and Regeneration Act 2008, Part 2, Chapter 1, Clause 79:
A Community Land Trust is a corporate body which:
1) Is established for the express purpose of furthering the social, economic and environmental interests of a local community by acquiring and managing land and other assets in order to:
- provide a benefit to the local community
- ensure that the assets are not sold or developed except in a manner which the trust's members think benefits the local community
2) is established under arrangements which are expressly designed to ensure that:
- any profits from its activities will be used to benefit the local community (otherwise than by being paid directly to members)
- individuals who live or work in the specified area have the opportunity to become members of the trust (whether or not others can also become members
- the members of a trust control it.
For further details see www.communitylandtrusts.org.uk.
Community enterprise/community business
Suitable where a group of people want to start a business which is locally rooted and driven by a philosophy of community benefit, enterprise, inclusiveness and community control. They give people from all corners of their local community the power to change their spaces and places, improving the social and economic prospects of their community into the long-term.
- It has four key elements:
- Community control
- Community benefit
Some community benefit societies and co-operatives may meet the definition of a community enterprise/business, with many opting to undertake a community share offer in order to encourage community ownership, become sustainable and less reliant on grant funding.
For more information see: www.communityshares.org.uk.
Community supported agriculture (CSA)
CSAs may be community or farmer-led, and operate as a partnership approach between farmers and consumers where the responsibilities and rewards are shared. The consumers give a commitment to their local farm in return for a share in the produce. The partnership reconnects people with the land and local food and provides a secure income for farmers.
Many are registered as societies - both as co-operatives and community benefit societies, but CSAs can take a variety of legal forms.
For further details see www.soilassociation.org/csa
Development trusts are community organisations which are owned and managed by the local community, aim to achieve the sustainable regeneration of a community or address a range of economic, social, environmental and cultural issues within a community, are independent but seek to work in partnership with other private, public and third sector organisations, aim to reduce dependency on grant support by generating income through enterprise and the ownership of assets. All trading surpluses are principally reinvested in the organisation or the community.
Most are registered as companies limited by guarantee. Some have chosen to register as community benefit societies and the majority have charitable status. Smaller and new-start development trusts may be formed as associations.
These organisations come in a variety of forms, from a worker co-operative to a company with an employee benefit trust with some form of a share incentive scheme, which itself can take a number of forms.
While worker co-operatives are completely owned by the employees, in an employee-owned business this is not always the case. However, employee owners should be in the majority for the business to be classed as ‘employee-owned’. Many employee-owned businesses are set up as a result of an employee buy-out, when a previous owner/manager retires.
Your co-operative will be ‘for-profit’ if any of the profits are to be shared amongst members, be they customers, colleagues, or freelancers. This does not mean that your co-operative’s main goal will be to maximise profits: providing a successful service to members will remain your primary concern. However, creating a profit (often called a ‘surplus’ by co-operative businesses) is vital to ensure your business can cover expenses and grow.
Sharing the profit in a co-operative is a way to keep it fair and make it worthwhile for members. Co-operatives which choose to share their profit in this way are considered ‘for-profit’. In contrast, a not-for-profit co-operative may not share its operating surplus with members, but instead must return the surplus in its entirety back to the business, as is the case with housing and social care co-operatives.
An organisation that operates public leisure facilities which is owned and controlled by its stakeholders.
Most are registered as companies limited by guarantee or community benefit societies and some have charitable status.
Typically, they will have a ‘stakeholder board’ drawn from partners, funders, staff and users. However, some trusts are co-operatives and are wholly operated by their staff whereas others have varying degrees of staff influence on their governing bodies.
For further details see www.sporta.org.
Mutuals are organisations majority owned and controlled by their members on a fair and equitable basis. Co-operatives are part of this family of businesses alongside other forms of member ownership. It is accepted that all co-operatives are mutual, however not all mutuals are co-operative as there is no requirement for them to abide by the Co-operative values and principles.
Common mutual organisations include building societies, health mutual and mutual insurers.
Suitable where you wish to start a business where the trade will tackle social problems, improve communities, people’s life chances, or the environment. Money will be made from selling goods and services in the open market, but profits will be reinvested back into the business or the local community. Your social enterprise can also be a co-operative if it is owned and run by its members.
A social firm is a market-led enterprise set up specifically to create good employment opportunities for people disadvantaged in the labour market. Social firms work around three main values – enterprise, employment and empowerment.
Social firms may use a range of legal forms. The company limited by guarantee, community interest company and co-operative society are promoted as suitable models.
For further details see www.socialfirms.co.uk.
A Supporters’ Trust is a democratic, not-for-profit organisation of supporters, committed to strengthening the voice for supporters in the decision making process at a club, and strengthening the links between the club and the community it serves.
A supporters’ trust is owned by its members, although the club to which it is attached may not be – at least to start with. Members are not beneficial owners and do not personally have any access to the organisation’s income or assets.
The majority are registered as community benefit societies using the model rules promoted by Supporters Direct – the national body set up to promote supporters’ trusts. Since providing capital and revenue support to their associated sports clubs is not a charitable purpose, supporters' trusts are not eligible for charitable status.
For further details see www.supporters-direct.org.
Tenants’ (and residents’) association
An organisation open to all tenants (and residents) within a particular geographical area, to promote their common interests and provide a unified voice. The association is owned by its members, although their homes will often be owned by a local authority, a housing association or a private landlord.
Tenants’ and residents’ associations will not be eligible for charitable status, but some may have associated charities to carry out educational or welfare activities. Small ones tend to be unincorporated associations, more established ones will register as companies limited by guarantee or, less commonly, as societies.
Voluntary or Community Organisation
Suitable where you wish to create a formal organisation made up of and run by volunteers which will engage in activity for environmental, economic or social good. Grants and donations are likely to make up a large proportion of funds, but income through trading either with the open market or by providing public services may also be a part of your turnover, perhaps a major one.
Your voluntary or community organisation may also be considered a co-operative if it is owned and run by its members.