It is not always easy for entrepreneurs to determine which of a non-profit organization (“NPO”) or a cooperative (“Coop”), is the most appropriate legal entity to accomplish their social economy project.
These two types of organizations have several similarities. For example, NPOs and Coops i) have a social purpose; ii) benefit more than one person; iii) give a single vote to their members regardless of their contribution or participation; and iv) cannot be sold.
They have differences and the deciding factors directing the choice between an NPO and a Coop are their purpose and their democratic functioning.
The NPO aims to promote, defend a cause and meet the needs of a community. Its objectives must be purely social, charitable, artistic, philanthropic or altruistic. It is a separate legal entity, distinct from its members, that has its own rights and obligations. Only a small part of its activities may be for commercial purposes, otherwise its commercial activities must be secondary to the NPOs objectives.
When a project requires a significant involvement from volunteers and people in the community, the NPO is the legal entity is generally the most appropriate.
The Coop’s objective, on the other hand, is to meet the economic, social or cultural needs of its members. It is also a legal person that is distinct from its members, and their liability is limited to the value of the units that they have subscribed for. The purpose of a Coop must be specific and based on the category of cooperative desired (consumer, producer, labour, worker shareholder co-operative (WSC) or multi-stakeholder cooperative).
The Coop may be best suited for a group of individuals or companies who choose to pool their resources to meet common needs, such as the provision or the sale of products or services, or the creation of jobs. It is also the appropriate legal form if one wishes to assign more control and power to the members
Finally, it is possible to continue a non-profit into a Coop, and vice versa, if the legal entity chosen at the outset is no longer the appropriate form for the achievement of the organization’s objectives.
By Mélanie Masson