Cooperative structures
Every group that makes and sells together eventually outgrows the informal arrangement it started with. Not because the law demands it on day one, but because a legal structure forces clarity about ownership, decisions, profit, and what happens when someone leaves. The right structure depends on what the group does, how it wants to decide things, and what it needs to protect.
Worker cooperatives
A worker cooperative is a business owned and democratically controlled by the people who work in it: one member, one vote, regardless of capital contributed, with profits distributed by labor rather than ownership share. It fits groups whose identity is the shared work. Forming one takes more legal effort than an LLC, but you get governance with democratic bones built in. The US Federation of Worker Cooperatives and the Democracy at Work Institute (institute.coop) both offer model documents and technical assistance. The seven cooperative principles, open membership, democratic control, member economic participation, autonomy, education, cooperation among cooperatives, concern for community, make a solid checklist when drafting founding documents.
LLC with operating agreement
A multi-member LLC is more flexible than a co-op and has exactly as much democracy as its operating agreement specifies, which by default is none. For a small group with high trust, a carefully drafted operating agreement can deliver most of what a co-op would: how decisions get made, how profits split, what happens when someone leaves, how new members join. The key word is 'carefully.' A boilerplate agreement answers none of those questions well. This is the place to pay a lawyer.
Informal arrangements and their limits
Most groups start informal: one person holds the money, everyone trusts everyone, nothing is written down. This works right up until it doesn't, a disagreement about money, a member leaving and wanting their share, a customer dispute that requires knowing who is legally responsible. The informal arrangement that felt like trust while everyone got along becomes the problem itself when something goes wrong. Build the structure before you need it, while nobody's angry.
Which fits which situation
A group doing joint purchasing, bulk supplies, shared orders, doesn't need formal structure yet. A group selling under one name, pooling revenue, and making collective production decisions does. The test is shared financial exposure: if one member's actions could create liability for the others, you need a structure that defines and limits that exposure. If you're unsure whether you've crossed that line, you probably have.
Community Experiences
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