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Forming a business

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 …

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Thoughts from a new economies’ attorney: distinguishing cooperative governing structure

In my previous posts, I discuss how traditional businesses and cooperatives diverge from a capital (and return on capital) point-of-view. Another common misconception is that cooperatives function like nonprofits, typically from the perspective of governance structure. They don’t. Cooperatives are businesses, and, as such, business principles and governance, and business governing structure apply to them. …

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Thoughts from a new economies’ attorney: patterns that create different kinds of (business) ownership – traditional capital investment

If you are reading this post, chances are you are an innovator, you are looking for guidance on alternative business forms, you run or are part of a mission-driven organization, you are considering adopting democratic governance models in your business or nonprofit, or some combination of those. I have to alert you that this is …

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Mandatory Business Owner Reporting

The federal government has passed some new legislation that will require small businesses to report personal information about the business’s owners to a database controlled by the Securities Exchange Commission.  The legislation is called the Corporate Transparency Act (the “Act”), adopted as Title LXIV (64) of the 2021 National Defense Authorization Act.  The purpose of …

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Voting Structures for Businesses

All corporations and cooperatives have some sort of democratic model for decision making. There are two major voting structures for all businesses. The first: “one share, one vote;” means that an investor gets one vote for each share of a company they own. The second: “one member, one vote;” means that each cooperative member or …

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Use of the term “Cooperative”

Edited June 26th, 2020: An earlier version of this blog post implied that only organizations incorporated as cooperatives under Massachusetts law may use the word “cooperative.” This post has been edited to accurately reflect that other businesses may use the term if they distribute earnings consistent with cooperative law. Entity formation is often the first …

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New Models for #platformcoop Design, Part 5: Reciprocal Ownership

In this series so far, we have analyzed the potential for a sistered for-profit entity and cooperative entity to separately optimize for financing and member-orientation.  Since publishing this series, I’ve received some good feedback from readers.  Some have asked about additional terms and benefits that could be designed into the TechCo – Cooperative “pre-nuptial” agreement. …

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