This section is designed to help you to determine the options you have for your co-operative’s legal structure.
Your co-operative will need a legal form: this defines the sort of organisation it is considered to be in the eyes of the law, for example, whether it is a company limited by guarantee or by shares, a society or an association. It is important to consider the variety of legal forms available to formalise your co-operative and establish a best fit based on your business plan.
The legal form you choose, together with your governing document, will create your organisation’s legal structure. Read through the information below and then take the steps to work through our select-a-structure tool.
Incorporated vs. Unicorporated
Make sure you understand the difference between incorporated & unincorporated co-operatives.
- It is usually advisable for a co‑operative, whatever its type, to incorporate to limit the liability of its members and governing body.
- If a co-operative wishes to incorporate there are a number of different legal forms that may be considered, such as companies limited by guarantee, companies limited by shares, societies or community interest companies. The co-operative society is generally considered to be the most appropriate legal form for a co-operative.
- Co-operatives can, however, choose to operate on an unincorporated basis when they first start up or if limited liability is not required, in which case they may still adopt a written constitution.
Co-operatives UK can help your create your co-operative using one of our model governing documents, there are more details on this later in this section.
Choosing your co-operative structure
We have developed a select-a-structure tool to help outline the options available for your co-operative regarding legal form and organisational type, based on your business plan.
The tool will ask you questions based on key aspects of your business plan. At the end of the tool, you will be given a list of legal forms and organisational types that are appropriate for your co-operative based on your answers given.
How does the tool work?
- You will be asked a series of questions about your organisation
- The answers you give will mean some of the legal structure options will become more, or less, likely for your organisation
- Those marked less likely are still possibilities but probably will not be your first choice; and those remaining are most likely suitable for your organisation
- At the end, you will be left with a list of possible legal structures dependant on the answers given
- If more than one option remains likely it means you may well have a choice of legal structures
- If all options are marked 'unlikely' in either list, you may need to re-visit the answers given, or you may want a mix of features that simply cannot be achieved, in which case you should speak to an adviser.
Before you use the Select-a-Structure tool, please make sure you know and have to hand the information we have listed below. The more accurate your answers at this stage, the more appropriate the options presented to you at the end of the tool.
- Who is the organisation being set up to benefit?
- Will the organisation take on risks, eg entering into contracts or employing people?
- How will the organisation be financed both in the short and longer term?
- Who will be eligible to be members of the organisation, and how many will there be?
- Consider if any of your organisation's activities will be charitable (or potentially charitable), and if unsure consider the Charity Commission's guidance.
- Ensure you understand what an asset lock means, and whether it is applicable to your organisation. Information on asset locks can be found in section 7.2 of our Simply Legal guide.
Before moving on to use the select-a-strucure tool, please read this disclaimer:
- This select-a-structure tool is intended to give general information about the range of legal structures and organisational types that may be suitable for a range of organisations and cannot be regarded as a substitute for legal advice. Consequently, no liability can be accepted for loss or expense incurred as a result of relying in particular circumstances on statements made or results generated by the tool.
- We will email you with your results. We will store responses to this tool in order to monitor the different types of organisations using the tool. The answers you give will not be shared with a third party.
- After completing the tool, you will be directed to information to help you understanding the results, and your possible next steps.
- We will also signpost additional support to help you through this part of setting up a co-operative.
Get started: use our Select-a-structure tool
Now you're ready to get some help in working our your options for the structure of your co-operative, including your legal form and organisational type.
Please note: if you are unsure of the meaning of these terms, consult the Glossary in Chapter 12 of Simply Legal.