IReF - Business Model Comparison

Considerations	Co-operative	Corporation	Partnership	Sole Proprietor
Values	Democratic equality, sharing, community focus, needs based	Hierarchical, profit-focused, maximize shareholders’ wealth	Depends on partners’ value system	Personal values of owner
Application	Applies to any kind of business or need, no limit in size	Applies to any kind of business, no limit in size	Small businesses & professionals	Usually small businesses
Business Viability	Feasibility Study & Business Plan	Feasibility Study & Business Plan	Feasibility Study & Business Plan	Feasibility Study & Business Plan
Ownership	Worker – 3 people or more Other – 5 people or more	Individual or more people	Two or more people	Individual
Decision-making	Democratic – consensual or one member one vote	Majority rules – Based on number of common shares held	No formal process	Individual – no formal process
Legal Set-up - Legislation - Cost	Simple to Complex -Co-operative Corporations Act -$1,000 plus	Simple to Complex - Business Corporations Act -$1,000 plus	Simple to Complex -Business Registration - $150 plus	Simple -Business Registration - $150
Profit & Non-profit	Both are possible	Both are possible	Both are possible	Profit-oriented
Capitalization (for profit)	Flexible -member (voting) shares -preference shares (various classes) -bonds, debentures, loans More than 25 owners – Must issue Offering Statement	Flexible -common (voting) shares -preference shares (various classes) -bonds, debentures, loans More than 35 owners – Must issue Prospectus ($100,000 plus)	Usually limited to partners, family, friends & bank loans	Usually limited to owner, family, friends & bank loans
Ease of Start-up	Depends on size, complexity, capital required, teamwork	Depends on size, complexity, capital required, teamwork	Requires team work to be simple & quick	Usually simple & quick
Return on Investment (ROI) (if profitable)	Patronage rebates and unlimited return on preferred shares, no capital gains as shares are par value	Unlimited return on investment, including capital gains on the sale of assets or shares traded on stock exchanges	Unlimited return	Unlimited return
Financial Losses	Shared, & deductible only from co-operative income	Shared, & deductible only from corporate taxable income	Shared, & deductible from partners’ income	Deductible from owner’s income
Financial Liability	Limited to member investment	Limited to shareholder investment	All partners’ personal assets, can be limited	All personal assets
Tax Implications	Non-profit with social objectives is tax exempt. For-profit is taxable.	Non-profit with social objectives is tax exempt. For-profit is taxable.	Taxable as self-partnership income.	Taxable as self-employment income.
Income Tax	Patronage rebates expensed before taxes (decreases corporate tax), corporate rate usually lower than personal; No income tax on patronage rebates (agricultural co-ops)	Dividends deducted on after-tax income (are not expensed before tax to decrease income), corporate rate usually lower than personal	Income is taxable at personal rate in hands of partners	Income is taxable at personal rate in hands of owner
GST & PST	Both must be collected and paid if applicable	Both must be collected and paid if applicable	Exempt if Status Indian on reserve	Exempt if Status Indian on reserve
Productivity	Powerful combination of shared ownership & decision-making	Depends on management ability & employee relations	Strong internal motivation	Strong internal motivation
Team Work	Built into structure through shared ownership & power	Depends on management, but often superficial	Depends on management style	Depends on management style
Survival Rates	Twice as high: 40%+ over ten years	20% over ten years	20% over ten years	20% over ten years
Conflict Potential	Values & structure support diversity of views & conflict management	Depends on management, but competitive culture leads to conflict	Depends on partners’ temperament & management style	Depends on owner’s temperament & management style
Agility	Democracy takes longer, but usually results in better decisions & more commitment	Depending on size & management style, can be extremely agile	Depends on partners’ relationship & management style	Depends on owner’s decision-making style
Entrepreneurship (risk taking & innovation)	Depends on size, members’ temperament & organizational culture, often innovative	Depends on size, owner temperament & organizational culture, often innovative	Depends on owners’ temperaments, may be less innovative	Depends on owner temperament, often very innovative
Cultural Barriers	Competitive culture & values lead to negative stereotypes about co-operatives	Well suited to the dominant culture’s values of global competition & wealth disparity	Competitive culture & values often lead to conflict	Well suited to individualistic society
Local Economy	Money & jobs stay in local economy	Money goes to shareholders, jobs to cheapest area	Money & jobs usually stay local	Money & jobs usually stay local