These are all terms used in the cooperative business community and sometimes their meanings are unclear or jumbled. This blog will discuss the definitions of these terms with examples of how they are used by different types of cooperatives. A patron patronizes a cooperative and receives a patronage dividend at the end of the year. …
DAO meets cooperative: Mensiversary of the Wyoming DAO law
In the next few weeks, my colleague Yev Muchnik and I will be posting some of our thoughts on legal aspects of DAOs. Yev has been in the blockchain world for a long time and is a renowned expert in the subject. Providing legal support to cooperatives and social enterprises adopting democratic governance is a …
Updated Section 1042 Tax Benefits
There is a section of the Internal Revenue Code (IRC) that provides some tax benefits for people who sell their companies to either an ESOP or to a worker cooperative. This blog will explain how 1042 provides tax advantages when selling to a cooperative. If you are thinking of becoming employee-owned or selling your business to …
Selling to a Worker Coop Over Time
Many businesses are looking at the possibility of selling their companies to their employees through a worker cooperative. They have crunched the numbers, gotten the employees interested, have figured out the financing, but now want to explore the timing of a potential sale. Often there is a misconception that the owners have to sell 100% of the business in one lump sum, in …
VC Investment into Democratic, Worker-Owned PBC
What does it feel like when traditional notions of worker-ownership come face to face with venture capital and a deal gets hammered out? As you might expect, pretty exciting and hopeful. One of our clients came to us a little more than a year ago as a group of workers and friends who left …
Co-ops and Capital
A few weeks ago, I presented to the Colorado Employee Ownership Commission about co-ops and capital formation strategies and options. Here is the presentation. If you’d like to learn more about the subject, or design your own cooperative’s capital strategy, you can book a bespoke consulting session with me, HERE.
The Department of Labor “new” final rule for gig workers
On May 5th, the U.S. Department of Labor (DOL) announced the withdrawal of the “Independent Contractor Rule” which had been adopted by the Trump administration. The rule was expected to be effective on March 8, 2021, but a presidential memo, dated January 20, 2021, has postponed it for two weeks and is expected to open …
How patronage is really paid out to cooperative members: qualified and nonqualified written notice of allocations (2/2)
Patronage dividends represent a unique opportunity for cooperatives to avoid taxation on some of the cooperative’s earnings.[1] Early this month I highlighted the concept of patronage dividends. Generally, when members receive taxable distributions of earnings from a cooperative, such as patronage dividends, they are included in the patrons’ gross income along with other income the …
How patronage is really paid out to cooperative members: qualified and nonqualified written notice of allocations (1/2)
Recently, I had a few clients asking about the distinction between qualified and nonqualified written notice of allocation. Tax season being right around the corner, it feels like a good opportunity to talk about those. The USDA has some wonderful material[1] explaining the definition and use of both notices of allocation, this post and the …
Vlog: Mission Outcomes Convertible Series Preferred Term Sheet
I have been working for over a year on a template impact oriented term sheet with the above captioned mouthful of a name. Here is a loom explainer on what it’s all about. Email us if you’d like to learn more, or want to consider deploying it. Episode 1 Episode 2
