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 step in a business becoming visible to a state government and to the public. This begins with filing a business’s articles of incorporation or articles of organization with a secretary of state. If you’d like more information on entity formation generally, you can check out our blog post here on choosing the right entity for your business.
But before filing the articles of incorporation, you need to choose a name. Every state has specific standards in naming a new entity. There are two basic requirements: that the name is unique and that the entity use or avoid certain words. For example, in most states, an entity’s name may not contain the words: “Company,” “LLC,” or “Partnership” unless that title describes how the entity is actually formed. In some states, the same is true for the word “Cooperative” or “Co-op” or “Coop”. These statutes were written to prevent confusion among the public about the entity’s formation or function.
The naming rules vary significantly from state to state. Of the states whose statutes speak to the issue of “cooperative” in an entity name, most fall into two camps: those that require the use of the word “cooperative” for cooperatively organized entities, and those who permit the term’s use. The information below illustrates some of the state approaches to use of the word “cooperative” in entity names, but is not intended to be exhaustive.
Several states have laws that require cooperative businesses to include “cooperative” or an abbreviation thereof in their entity names. Generally, these states do not have compliance mechanisms, such as fines or the right for other businesses to bring litigation.
California (Sec. 12311): In California, the term “cooperative” is allowed only if the entity is a nonprofit agricultural cooperative, a stock cooperative, a housing cooperative, a credit union, or under some other state law. Consumer cooperatives, worker cooperatives, cooperatives formed for waste management, or others formed under the Cooperative Corporation Law must use the word “cooperative” in their name. California law does not penalize businesses that violate the statute.
Texas (Sec. 5.057): Texas corporate law forbids using “cooperative” in the name of any entity that is not either an electric cooperative or a cooperative formed under the state’s cooperative associations statute. In Texas, both domestic and foreign cooperative associations must use the word “cooperative,” or an abbreviation thereof (i.e. “co-op”), in their entity name. There are no penalties for businesses that violate the Texas statute.
Louisiana (Secs. 12:404 & 12:499.6): In Louisiana, there is no specific ban on the use of the work “cooperative” in an entity name. However, no business other than an electrical cooperative may use the phrase “electric cooperative.” Further, electric cooperatives must use both “Electric” and “Cooperative”; seemingly Louisiana state law does not permit abbreviations or variations of these words. Cooperative housing corporations must also include “cooperative” in the legal entity’s name. Louisiana law contains no enforcement provision when entities violate the corporate naming statute.
Pennsylvania (Sec. 7103): A cooperative corporation in Pennsylvania must use the term “cooperative” or one of its abbreviations in its entity name. Under Pennsylvania code, “cooperative corporation” includes worker cooperatives and housing cooperatives, but specifically excludes credit unions. The Pennsylvania code does not penalize businesses that violate the rules on entity names.
The other major camp of state law for using the word “cooperative” in entity names places the onus on non-cooperative businesses to not use the word cooperative in their names. These statutes prevent other businesses from using the word “cooperative” and allow cooperative businesses to elect to use the term. Generally, these statutes are accompanied with provisions that at least prevent entities from doing business if they violate the statute; some also impose fines.
Illinois (Sec. 22): In Illinois, most businesses are prohibited from using the word “cooperative.” However, housing cooperatives, non-profit cooperative associations, and limited worker cooperatives may use the word “cooperative” in their name, if desired. If an Illinois business violates the naming statute, that entity will be enjoined from doing business in the state.
Oregon (Sec. 62.850): Oregon forbids all entities that are not cooperatives from using the word “cooperative”. Cooperatives that may use “cooperative” in their entity name include housing cooperatives, employee cooperatives, and others incorporated under Oregon state law. Under Oregon law, any cooperative may bring a lawsuit against a non-cooperative business entity that uses “cooperative” in their name, without showing any damages. The court will then issue an injunction, preventing the non-cooperative from using the term.
Washington (Sec. 23.78.040): In Washington, no business entity, incorporated after 1989, may use the word “cooperative” unless the business is an “employee cooperative corporation,” the state’s term for worker-owned; a “limited cooperative association;” a credit union; or a cooperatively structured non-profit. Businesses organized under any of these structures may, but are not required, to use the word “cooperative” in their entity name. Unlike the other states in this section, Washington, has no enforcement provisions against businesses that violate this statute.
New York (Sec. (j)): Under New York law, only worker cooperatives, member cooperatives, agricultural cooperatives, housing cooperatives, and other cooperatives allowed under state law may use the term “cooperative.” Any entity that violates that provision is guilty of a misdemeanor and must pay a fine of $500. Any cooperative may sue the violating business for an injunction, asking for a court order to stop using the name.
Finally, some states require certain cooperatives to use “cooperative” in their entity name, but only those organized for a particular purpose.
Colorado (Sec. 7-90-601): Colorado law permits, but does not require, a cooperative to use “cooperative,” or an abbreviation in its name. On the other hand, a limited cooperative association is required to use the words “limited cooperative association” or “limited cooperative” or the abbreviation “L.C.A.” or “LCA,” or accepted abbreviations of those terms. In addition, Colorado law prohibits any business that is not (i) formed under a cooperative statute or operated on a cooperative basis, (ii) a health care coverage cooperative, (iii) a housing cooperative, or (iv) taxed under IRC 501(c)(6) from using the word “cooperative” in their entity name. There are no penalties under Colorado law for businesses that violate this statute.
Massachusetts (Ch. 157, § 8; Ch. 157A, § 5; Ch. 157B, § 7-8): Massachusetts has varying rules depending on the structure of a cooperative. Employee cooperatives, cooperative banks, and agricultural cooperatives may, but are not required to use the word “cooperative” in their names. In contrast, a housing cooperative must use the word “cooperative” in its entity name.
The statute also permits businesses whose net earnings “are distributed in a manner permitted for a co-operative corporation” to use the word “cooperative” in its name or title. As such, regardless of how the business is structured, that business may use the word “cooperative” if they distribute earnings consistent with Massachusetts cooperative law.
Any unauthorized business that uses “cooperative” in its entity name in Massachusetts is in violation of state law and must pay a fine of $100 per day, for each day the entity is in violation, to the Commonwealth. Courts may prevent businesses from using the term through injunction.