The Harvard Law School has provided community access to legal services with the Transactional Law Clinics (TLC) since 1979. TLC includes the Community Enterprise Project (CEP) in Boston’s Jamaica Plain. These organizations have put out the legal guide “Tackling the Law, Together” in a PDF that describes legal issues and opportunities for co-ops. This means legal structure! tax law! employment law! Yes, it is exciting stuff; developing legal strategies essential for co-ops. Although Harvard and the clinics are Massachusetts-based, the report addresses US law generally as much as possible. It was published in coordination with The Boston Center for Community ownership, The Boston Impact Initiative, the California-based Sustainable Economies Law Center.
Legal structure is the first building block of a formal co-op and there are some to choose from: corporation, benefit corporation (different from the “b-corp” designation), cooperative corporation, and LLC (limited Liability company). Non-profit status is considered not applicable to co-ops that generate profits for owners. Then, did you know, that separate from your legal structure, you can be taxed as something else? And the Subchapter T of the Internal Revenue Code (IRC) can be especially advantageous.
“It is important to keep in mind that the legal structure of a business is distinct from its tax structure. For example, a corporation does not have to be taxed under Subchapter C of the IRC (Internal Revenue Code); instead, it can choose to be taxed much like a partnership if it elects to be taxed under Subchapter S. Similarly, an LLC can elect to be taxed as a partnership (under Subchapter K), as a C-corporation (under Subchapter C), or as a cooperative corporation (under Subchapter T).”
See the report for more on tax law, immigration law, co-op conversions, and more. It’s a 47-page overview and “does not constitute legal advice” – like this blog post.
Laura Flanders is taking notice, too, of cooperative law. She recently interviewed Janelle Orsi from Sustainable Economies Law Center (SELC) on the subject. Also interviewed was Micky Metts from the Agaric cooperative. So, check out the report from CEP and the Laura Flanders interview.