| > IMO, leadership making these values core to the business is going against the grain, putting your probability of survival below or equal to that of others, which is why they are a rare occurrence The rarity of co-ops is definitely not from survival rates, because they completely trash regular businesses in that regard: > A 2013 report published by the UK Office for National Statistics showed that in the UK the rate of survival of cooperatives after five years was 80 percent compared with only 41 percent for all other enterprises.[5] A further study found that after ten years 44 percent of cooperatives were still in operation, compared with only 20 percent for all enterprises. > In a 2007 study by the World Council of Credit Unions, the five-year survival rate of cooperatives in the United States was found to be 90% in comparison to 3-5% for traditional businesses. (This figure seems kind of hard to believe... Maybe there's some self-selection bias in that people in the US might be much more willing to personally risk starting any number of different kinds of businesses for themselves and at most one, maybe two others, whereas they might only be willing to start a co-op with multiple other people if it looks like a pretty sure thing with a well-established model?) > A 2010 report by the Ministry of Economic Development, Innovation and Export in Québec found that the five-year survival rate and ten-year survival rate of cooperatives in Québec to be 62% and 44% respectively compared to 35% and 20% for conventional firms.[53] Another report by the BC-Alberta Social economy Research Alliance found that the three-year survival rate of cooperatives in Alberta to be 81.5% in comparison to 48% for traditional firms. https://en.wikipedia.org/wiki/Cooperative#Economic_stability There are probably many reasons why co-ops are rarer, but the obvious one of relevance to the startup community is that you wouldn't start a co-op if you were hoping to make tons and tons of money rather than a "merely" reasonable income. |
1. Less access to capital. Investors want to exchange capital for ownership. Co-ops oppose this model. There are alternative methods for raising cash (subordinated capital campaigns are a successful example), but banks are conservative in nature and are just not eager to underwrite things they aren't very familiar with.
2. Discriminatory taxation. Are co-op member-owners to be taxed at the earned income rate, the capital gains rate, or both? The IRS has intentionally left this unclear and repeatedly refused to give strong guidance, putting co-ops at a distinct disadvantage in paying members and structuring membership.
3. Consistent legal structure. Unlike with the relatively standardized form of the limited liability corporation, the definition of the legal corporate form for co-ops varies widely between states and countries. This lack of standardization makes each incorporation process a custom, costly, time-intensive exercise.
I am of the opinion that cooperatives are a superior legal structure to LLCs for lots of reasons internal and external to the firm. But until these core problems are addressed, cooperatives will remain relatively rare, despite their many advantages.