Organize a consumer cooperative under chapter 308B

Who this is for#

Customers who want to own the business that serves them (a grocery, a utility-like service, a buying club) and the people drafting their documents.

The short answer#

Chapter 308B has no "consumer cooperative" category. You form an ordinary 308B cooperative and make it a consumer cooperative by choosing customers as your patron members and defining patronage in terms of their purchases. The statute defines patronage as business, transactions or services "done for or with the cooperative as defined by the cooperative," and a patron member as a member holding a patron membership interest that requires the holder to conduct patronage business with the cooperative ^{P1, § 308B.005, subds. 21-23}.

The purposes section expressly includes a cooperative formed "to provide products, supplies, and services to its members" ^{P1, § 308B.201}. [INFERENCE] That is the closest the statute comes to describing a consumer cooperative.

What the statute gives you#

• Patron-member control. A patron member is entitled to one vote on matters put to patron members, unless the articles or bylaws give additional votes based on patronage criteria; patron members vote collectively, and the bylaws cannot reduce their collective vote below 15 percent of the total vote ^{P1, § 308B.545, subd. 1}. See Member voting rules in Chapter 308B.
• Economic floor for patrons. Patron interests collectively hold at least 60 percent of financial rights to profit allocations and distributions, or at least 15 percent if authorized as the statute requires ^{P1, § 308B.601, subd. 3}.
• Bylaws content. The bylaws or the articles must cover the purpose, capital structure, classes, voting and governance rights and the patronage allocation rules ^{P1, § 308B.241, subd. 2}. See Write the bylaws.

What your bylaws must decide#

1. What counts as patronage. Purchases, in dollars? Purchases of certain categories? Is a member who does not buy in a year still a member?
2. Membership fee or equity. How much a customer pays to join, whether it is refundable, and what rights it carries. See Raise member equity and capital.
3. Patronage refunds. Whether, when and how surplus is returned in proportion to patronage. See Allocate patronage and make distributions.
4. Nonmember business. The statute expressly permits providing products, supplies and services to members and nonmembers § 308B.301, subdivision 2. Members may authorize nonmember patrons to participate in net-income distributions on equal terms through the bylaws, with the crediting and membership rules in § 308B.725, subdivisions 6–7. Define the policy and obtain tax advice; do not mistake nonmember customers for nonpatron investor members ^P1.

Formation#

The SOS articles form has no cooperative-type field; the consumer character comes from your bylaws and membership terms ^G1. For the steps, see Form a Minnesota cooperative under Chapter 308B.

Common mistakes#

1. Treating a membership fee as a donation instead of a defined equity or fee under your bylaws.
2. Not deciding whether patronage refunds will be paid at all, then promising them in marketing.
3. Using a retail template from another state without checking it against chapter 308B.