Source: http://www.dmlp.org/legal-guide/forming-journalism-cooperative-new-york
Timestamp: 2020-01-18 11:35:18
Document Index: 30988778

Matched Legal Cases: ['§ 84', '§ 84', '§ 13', '§ 82', '§ 13', '§ 301', '§ 87', '§401', '§ 91', '§ 702', '§ 91', '§ 64', '§ 64', '§ 88', '§ 89', '§ 44', '§ 45', '§ 804', '§ 89', '§ 88', '§14', '§ 202', '§ 701', '§ 90', '§ 90', '§ 90', '§ 82', '§ 402', '§14', '§ 202', '§ 404', '§ 60', '§ 408']

Forming a Journalism Cooperative in New York | Digital Media Law Project
You should familiarize yourself with two chapters of the Consolidated Laws of New York: Chapter 77, which governs cooperative corporations, and Chapter 4, which governs business corporations. You may also wish to familiarize yourself with our pages on forming a corporation in New York. Where Chapters 77 and 4 conflict, Chapter 77 on Cooperative Corporations Law is controlling with respect to cooperatives. Chapter 4's references to the "shareholders" and "share certificates" have the same meaning as Chapter 77's "members" and "membership certificates," respectively. See N.Y. Coop. Corp. Law § 84. In addition, Chapter 4's sections on purchasing and payment for shares and voting in relation to shares do not apply to cooperatives. See N.Y. Coop. Corp. Law § 84.
Note that the only form of journalism cooperative that is likely to be permitted under New York law is a worker cooperative operated for profit. See N.Y. Coop. Corp. Law §§ 13, 83. A worker cooperative is a cooperative that is formed, owned, and controlled by the business' workers with its membership entirely comprised of workers. A worker cooperative is formed when a corporation organized under the Business Corporation Law elects to be governed as a cooperative and states such in its articles of incorporation. This may occur when the corporation is formed or by amendment afterwards. See N.Y. Coop. Corp. Law § 82. Take care to review Article 5-A of the Cooperative Corporations Law, which focuses on worker cooperatives.
Alternatively, under N.Y. Coop. Corp. Law § 13, New York permits the formation of a cooperative "connected with the acquisition for its members of labor, supplies and articles of common use ... to be used or consumed by the members, their families or guests." Membership in such a cooperative would not be limited to workers. It is at least possible that the product of a journalism organization might be considered "labor, supplies [or] articles of common use," but the term appears to refer primarily to "livestock, equipment, machinery, food products, family or other household and personal supplies."
Your cooperative's name must be distinguishable from the names of other corporations, limited liability companies, and limited partnerships already on file with the Department of State. You can search for the availability of your proposed name by writing to the Department of State, Division of Corporations, 41 State Street, Albany, NY 12231. The written inquiry should state that you wish to determine the availability of a corporate name (or names) and list the name (or names) to be searched. There is a $5 fee for each name, which must accompany the request. Searching the availability of a corporate name does not reserve the name. You may also search the New York Corporation and Business Entity Database to help you identify names that have already been taken, but this database might not be complete.
There are a large number of words that cannot be included in the name without prior approval. For a full list, see N.Y. Bus. Corp. Laws § 301.
You must use the word "cooperative," "corporation," "incorporated," or "limited," or an abbrieviation thereof, in your cooperative's name. See N.Y. Coop. Corp. § 87.
Determine the incorporators of the cooperative. The incorporators are those who participate in the forming of the cooperative, select initial members of the board of directors and officers, and create the articles of incorporation. All must be natural persons who are at least eighteen years old. See N.Y. Bus. Corp. Laws §401.
The by-laws of a worker cooperative shall provide for the election, terms, classifications (if any), and removal of directors and officers. See N.Y. Coop. Corp. § 91.
A worker cooperative must have at least one director. Unless otherwise fixed in the bylaws, the number of directors constituting the board will be one. See N.Y. Bus. Corp. Laws § 702.
Directors and officers need not be residents of New York or members of the cooperative, unless the certificate of incorporation or bylaws so require, except that at no time shall there be a majority of non-member directors, see N.Y. Coop. Corp. § 91, and the president and vice president(s) must be cooperative members that have been elected from the board of directors. See N.Y. Coop. Corp. § 64.
The officers shall include a president, at least one vice president, a secretary, and a treasurer. The secretary and treasurer positions may be combined. See N.Y. Coop. Corp. § 64.
The cooperative's articles of incorporation shall establish qualifications for membership. After completing a probationary period (which you must define and set forth in the bylaws or articles of incorporation), each qualifying worker in a worker cooperative must be offered membership. Memberships are purchased upon payment of a fee and on such terms as are provided in the bylaws; in return for the fee, the worker is issued a membership share. Only members may own membership shares, and each member shall own only one such membership share. See N.Y. Coop. Corp. § 88.
Except as set forth below, only membership shares are given voting power in a worker cooperative. See N.Y. Coop. Corp. § 89. Each member is entitled to only one vote, regardless of patronage (see section 3.b, below), and voting by proxy is permitted except when otherwise stated in the bylaws. See N.Y. Coop. Corp. § 44. A cooperative may also provide for voting by delegates and/or by district in the bylaws. See N.Y. Coop. Corp. § 45.
A worker cooperative may also issue shares of stock to non-members in return for a capital investment, but non-member shareholders may only vote when there is an amendment to the articles of incorporation that would adversely affect them in accordance with N.Y. Bus. Corp. Laws § 804. See N.Y. Coop. Corp. § 89.
Shareholders in a worker cooperative otherwise have the same rights and responsibilities as shareholders of a corporation formed under the Business Corporation Law. See N.Y. Coop. Corp. § 88.
The worker cooperative has broad powers–to form contracts, hold property, and so on. The complete lists of these powers are found at N.Y. Coop. Corp. §14 and N.Y. Bus. Corp. Laws § 202. You should know that the powers of the cooperative are subject to limitations stated in the Business Corporation Law and Cooperative Corporations Law.
By default, the board of directors exercises the powers of the cooperative, but you may limit those powers by using the articles of incorporation or the by-laws to reserve specific powers to members. See N.Y. Bus. Corp. Laws § 701.
Worker cooperatives shall specify the manner and times of apportioning and distributing proceeds in the certificate of incorporation or by-laws. Distribution may take the form of cash, credits, written notices of allocation, or capital stock issued by the worker cooperative. See N.Y. Coop. Corp. § 90.
Like cooperatives in most other states, a worker cooperative in New York may elect to distribute a portion of its profits as a "patronage dividend" (called a "patronage allocation" in New York) rather than as a stock dividend. Proceeds declared as patronage allocations must be distributed proportionately and equitably to members of the cooperative based on their patronage of the cooperative. See N.Y. Coop. Corp. § 90.
Unlike consumer-owned cooperatives, however, in a worker cooperative under the Cooperative Corporations Law, "patronage" means the amount of work performed as a member of the cooperative (as measured on terms set forth in the certificate of incorporation and by-laws). See N.Y. Coop. Corp. § 90. Nevertheless, the significant tax benefits at the federal level that are available to consumer cooperatives are also available to worker cooperatives that issue patronage allocations on the basis of work performed.
To form a worker cooperative, you must organize under the Business Corporation Law and state in your articles of incorporation (in accordance with Article IV of the Business Corporation Law) that you elect be governed as a cooperative. If you wish to transform a business corporation that already exists into a cooperative, you may amend the articles of incorporation to state this under Article VIII of the Business Corporation Law. See N.Y. Coop. Corp. Law § 82.
The articles of incorporation are the basic governing document of the cooperative. Basic information for the articles of incorporation includes the cooperative's name and purpose, the number of shares, and the "par value" of these shares. See N.Y. Bus. Corp. Laws § 402 for the complete list of information you must include in your articles of incorporation.
There is no set criteria for the content of bylaws, a set of internal rules that govern most day-to-day activities and procdures of the cooperative. Bylaws typically set forth internal rules and procedures for the corporation, including issues like the existence and responsibilities of offices, the size and qualifications of the board of directors and the manner and term of their election, and how the board of directors will function. You are not required to file bylaws with the Department of State, but the cooperative corporation must keep a copy at its principal place a business. See N.Y. Coop. Corp. §§14 and N.Y. Bus. Corp. Laws § 202.
You must submit your a certificate of incorporation to New York's Department of State. There is a filing fee for the certificate of incorporation of $125, plus a minimum tax of $10 based on the amount of stock authorized in the certificate. The Department of State's website provides a fill-in-the-blank form for the certificate of incorporation.
After the corporate existence has begun, the incorporator(s) must then hold an organizational meeting to elect the initial directors of the cooperative and adopt the bylaws. You can find the New York statute relating to the organizational meeting at N.Y. Bus. Corp. Law § 404.
If there are multiple directors, the initial board of directors should be divided equally into three classes based terms of one, two, and three years. At the expiration of theses terms, the successors will be elected for three-year terms. See N.Y. Coop. Corp. § 60.
If you have an employee or employees in New York (including officers), you must inform both the IRS and the State of New York. You can find details of all the necessary steps, including verifying work eligibility and withholding allowances, on the Hiring Employees section of the IRS website. You can find state-level information at the New York New Hire Home Page.
For tax purposes, a worker cooperative corporation in New York must file reports and pay taxes according to Article 9 of the Tax Law that applies to Corporation Tax. Members of the cooperative are subject to Personal Income Tax under Article 22 of the Tax Law.
All corporations in New York must file a Biennial Statement with the Department of Revenue every two years after the date of formation. The Biennial Statement is made on a form provided by the Department of State. For corporations, the Biennial Statement is automatically mailed to the address of the principal executive office or, if none is listed in the certificate, the form is mailed to the address for service of process. The Biennial Statement is mailed one month prior to its due date. The filing fee is $9. See N.Y. Bus. Corp. Laws § 408.
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