A cooperative conversion is the process of transforming an existing business into a cooperative, where ownership and governance are transferred to the people who are most directly connected to the business, most commonly, its employees, but can also be customers, producers, or community members.
For example, when a business owner retires, they may choose to sell the company to its employees rather than an outside buyer. The employees then become member-owners, sharing in decision-making, profits, and the long-term success of the business.
The following cooperative conversion steps will look different for every business depending on factors such as the size of your business, current staff engagement in decision making, the tenure of employees, and the organizational structure and culture of your business.
Most conversions of existing business to cooperatives use the worker-owned cooperative model. However, there are options for using other types like shared services and producer co-op models, depending on your industry and sector.
We outline the services that UWCC provides for each of the steps below and often work as a team to engage our various areas of expertise. For the services that we do not provide ourselves, we can connect you to co-op knowledgeable technical service providers for each phase of development.
Cooperatives thrive when there is a strong commitment to continuous learning. This learning should start when a group first starts exploring an idea and continue throughout the life of the cooperative.
- Element 1: Explore and Clarify
- Element 2: Assess and Plan
- Element 3: Build the Team
- Element 4: Make it Legal
- Element 5: Operate & Govern
- Element 6: Sustain & Strengthen
For even more info, please visit our Startup Resources Page.
Element 1: Explore and Clarify
Cooperative conversions often begin with reflection and conversation. Selling owners consider their long‑term goals, evaluate the business’s financial health, and begin discussing succession options with trusted partners and key employees.
During this stage, primary stakeholders:
- Clarify post‑exit goals and financial needs
- Assess the business’s stability and long‑term viability
- Explore the cooperative model and its legal and practical implications
- Learn from successful conversions in similar industries
- Gauge interest among key employees
- Identify advisors, technical assistance providers, and cooperative‑focused lenders
If stakeholders determine that ownership aligns with their goals and the business’s capacity, they move to the next stage.
UWCC Services:
Element 2: Assess and Plan
Before engaging the full workforce or other prospective owners, selling owners complete a valuation and feasibility study. This step determines whether a conversion is financially and operationally viable.
Evaluate financial feasibility
A third‑party financial analysis evaluates:
- The business’s market value
- Debt capacity and repayment feasibility
- Cash flow stability
- A cooperative’s ability to finance the purchase
Assess organizational readiness
Operational and cultural assessments examine:
- Workplace systems and processes
- Management structure and communication patterns
- The level of reorganization needed for democratic decision‑making
- Employee or other stakeholder readiness for shared ownership and accountability
This stage sets the foundation for a successful transition.
UWCC Services:
Element 3: Build the Team
Form a steering committee
If the feasibility assessment is positive, the business forms a steering committee to design the cooperative’s legal, operational, and financial structure.
Ideally, all employees are informed of the pending transition and invited to participate. The Steering Committee is responsible for drafting Articles of Incorporation and Bylaws which include key aspects of cooperative governance including:
- Membership eligibility criteria
- Member rights and responsibilities
- Board composition and election processes
- Patronage definitions and profit distribution methods
An attorney experienced in cooperative law should review all governing documents.
Set the foundation
Beyond drafting documents, the Steering Committee establishes values‑aligned governance practices and begins shaping a healthy cooperative culture. Groups that invest early in:
- Collective decision‑making tools
- Effective facilitation
- Conflict resolution
- Transparent communication
- Trust‑building
are far more likely to create a functional democratic workplace.
UWCC Services:
Element 4: Make it Legal
A major decision point is selecting the cooperative’s legal structure. In Wisconsin, cooperatives may incorporate under Chapter 185 or Chapter 193 by filing Articles of Incorporation or Articles of Organization with the Wisconsin Department of Financial Institutions. Some industries may require additional regulatory compliance.
Those who sign the Articles typically become the interim board of directors, responsible for:
- Finalizing bylaws
- Governing the cooperative until the first annual membership meeting
- Supporting the transition from owner‑led to member‑led governance
At the first annual meeting, members elect the first official board and ratify the bylaws. Bylaws can be amended as the cooperative evolves.
UWCC Services:
Element 5: Operate & Govern
The early years of a cooperative require intentional investment in education, training, and cultural development. Employees are learning new ways of relating to their jobs, their peers, and the business itself.
Key areas of focus include:
- Understanding where decision‑making authority lies
- Designing communication and accountability systems
- Building financial literacy across the workforce
- Establishing clear roles for the board, management, and members
- Practicing democratic processes and shared leadership
This stage is where the cooperative’s culture truly takes shape.
UWCC Services:
Element 6: Sustain & Strengthen
Ongoing education and governance development are essential for long‑term cooperative success. Training topics may include:
- Cooperative principles and models
- Cooperative finance and accounting
- Board governance and leadership
- Industry trends and market changes
- Effective teamwork and communication
Cooperatives thrive when they commit to continuous learning, transparent operations, shared responsibility, and participation in the cooperative ecosystem.
UWCC Services:
Need help?
Starting a cooperative can feel like a big undertaking, but you don’t have to do it alone.
In Wisconsin
UWCC offers co-op development services to help groups navigate the process of starting a cooperative. Assistance is available on a fee-for-service basis, and in some cases, grant funding may help offset the cost of support.
Outside of Wisconsin
If you’re located outside Wisconsin, Co-op Development Centers across the country can provide guidance and technical assistance to help you get started.
