The Cooperative Form: A Tool to Empower Immigrant Entrepreneurs and their Communities

by Mike Lam

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According to the American Community Survey, the U.S. immigrant population stood at more than 43.3 million, or 13.5 percent, of the total U.S. population in 2015.[1] Over forty percent of immigrants in the U.S. live in or are near living in poverty.[2] In addition to facing an amalgam of legal, social, and economic barriers, immigrant entrepreneurs must also resolve the complex racial, wealth and income inequalities prevalent across the nation.

During my 1L summer at a law firm in Minneapolis, I learned how the cooperative legal form empowered capable, hard-working, and entrepreneurial immigrants to create jobs within the community. A cooperative is a type of corporation formed under state statutes.[3] Cooperatives are distinct legal entities from their owners.[4] Cooperatives can be difficult to distinguish from other types of corporations because many features, such as fiduciary duties, limited liability, and boards of directors, exist in cooperatives as well. The key distinguishing feature, however, is that members and users of the cooperatives services own and control the business.[5] The Mercado Central market, a thriving marketplace of thirty-five businesses that aims to foster business development for Latinos, used the cooperative structure as a tool to create businesses, jobs, and a sustainable marketplace for the benefit of the community and its members.[6]

Cooperatives, historically underutilized in the United States, are growing in popularity across in the nation.[7] Cooperatives in the United States are typically found in the form of law firms, medical partnerships, and other professional corporations where regulation requires such business entities to utilize the cooperative legal structure when forming their corporation or partnerships.[8] Despite the relative lack of cooperatives in the United States, interest in this model has advanced the discourse in corporate law in a positive direction: empowering communities to create businesses and thereby narrowing the income-inequality gap.[9]

The cooperative legal form is particularly useful for helping community members become entrepreneurs because the fundamental structure of the cooperative empowers its members to finance, operate, or service the business for the mutual benefit of members.[10] Acting alone, many individuals, particularly low-income, immigrant individuals, might not have the resources to start a successful business venture.[11] Traditional corporations allow shareholders, among other things, to vote  and finance a business through equity ownership.  Depending on the certain circumstances, a shareholder may or may not have a say in the management of the business.  On the other hand, the cooperative structure mandates that individual members, who finance the business through membership, also become business owners with equal voting rights, regardless of their level of involvement or investment.[12]   The users, who are managers and owners of the business, hold it accountable for its actions. Moreover, the cooperative structure typically requires equitable and democratic sharing of profits, such that most if not all revenues are distributed pro rata to members based on their use of the cooperative.[13]  In addition to providing access to business ownership, the cooperative structure allows for business owners, who are also members and users of the cooperative, to better understand the needs and culture of each community.

The cooperative legal form can be a powerful tool for immigrants who aspire to become entrepreneurs. The equitable principles inherent in a cooperative make it ideal for business owners who face financing and cultural barriers to entrepreneurship. Ultimately, embracing cooperatives can help empower communities and narrow the income-inequality gap.

[1] Migration Information Source, Migration Pol’y Inst., https://www.migrationpolicy.org/article/frequently-requested-statistics-immigrants-and-immigration-united-states (last visited Apr. 2, 2018).

[2] Immigrants in the United States: A Profile of America’s Foreign Born Population, Ctr. for Immigration Stud., https://cis.org/Immigrants-United-States-Profile-Americas-ForeignBorn-Population (last visited Apr. 2, 2018) [hereinafter Immigrants in the U.S.].

[3] Michael Droke et al., A Practical Guide to the Special Laws Governing Cooperatives 1 (2014).

[4] Id.

[5] Id.

[6] Mercado Central, http://mimercadocentral.com/ (last visited Apr. 2, 2018).

[7] See generally Alicia Alvarez, Lawyers, Organizers, and Workers: Collaboration and Conflict in Worker Cooperative Development, 24 Geo. J. on Poverty L. & Pol’y 353 (2017).

[8] Peter Molk, The Puzzling Lack of Cooperatives, 88 Tul. L. Rev. 917, 917 (2014).

[9] Id.

[10] Id.

[11] See generally Immigrants in the U.S., supra note 2.

[12] See generally Priya Baskaran, Introduction to Worker Cooperatives and Their Role in the Changing Economy, 24 J. Affordable Housing & Community Dev. L. 355, 359 (2015).

[13] Michael Droke et al., A Practical Guide to the Special Laws Governing Cooperatives 2-3 (2014).