Formation of a cooperative is a complex endeavor.  You should familiarize yourself with two provisions of the Massachusetts General Laws (often abbreviated as Mass. Gen. Laws): Chapter 157, particularly sections 1 and 2, dealing with the creation of for-profit cooperative corporations (or simply "cooperatives"); and Chapter 156B, which governs corporations in general. Where Chapter 157 and Chapter 156B conflict, Chapter 157 is controlling with respect to cooperatives.

An additional layer of complexity is added by the fact that Chapter 156B was itself superseded for many purposes in 2004 by Chapter 156D of the General Laws. It is not presently clear whether references in Chapter 157 to Chapter 156B should be read to refer to the parallel provisions of Chapter 156D instead. If you have any questions about this process, you can contact the Corporations Division of Massachusetts Secretary of the Commonwealth's office; an attorney can also help you to interpret the relevant law.

Note that Massachusetts has no separate non-profit cooperative form suitable for a journalism organization, although it might be possible to form a Massachusetts non-profit organization that operates in a cooperative manner.

1. Choose a name for the cooperative and check for availability.

• Please see our section on choosing and checking the availability of a name for your business, as well as our section on the trademark law aspects of choosing a name.

• Your cooperative's name may not be the same as, or deceptively similar to, other corporate names on file with the Secretary of State (unless that other corporation gives written consent). See Mass. Gen. Laws ch. 156B, § 11 for more information about naming a corporation. 

• You may, but are not required to, use the word "cooperative" in your cooperative's name as long as you abide by all of Chapter 157's rules for distributing a cooperative's profits. See Mass. Gen. Laws. ch. 157 § 8.

2. Recruit and/or appoint directors and officers for the cooperative. 

• Determine the incorporators of the cooperative. The incorporators are those who participate in the forming of the cooperative, select initial board members and officers, and create the articles of incorporation. Massachusetts law requires at least one incorporator. The incorporator may be a natural person or a business entity, but if a natural person must be at least 18 years old. 

• The incorporators then choose two groups of people: the board of directors, and the officers. The board of directors generally establishes policy, makes major decisions, and chooses the officers after the incorporation phase. The officers manage the day-to-day operations of the cooperative. See Mass. Gen. Laws Ch. 156B, § 12.

• If there are at least three stockholders in the cooperative, there must be at least three members of the board of directors. You may choose to have a larger board by specifying their number in the cooperative's bylaws. Mass. Gen. Laws Ch. 156B § 47.

• The officers must include at least a president, treasurer, and clerk. The incorporators and, later, the board of directors may create other officer-level positions as well.

3. Structure your cooperative.

a. Determine the different levels of membership/stock. 

• Cooperatives in Massachusetts can create different classes of stock with different rights and responsibilities. These rules are laid out in the cooperative's articles of incorporation. However, no stockholder in a cooperative gets more than one vote in the cooperative's operation, regardless of their number of shares held, and no stockholder can hold more than $1,000 (in par value) worth of stock. See Mass. Gen. Laws Ch. 157, § 2. 

• Massachusetts law appears to allow the creation of different classes of stock, giving some classes voting rights and some not. See Mass. Gen. Laws Ch. 157, § 2: no stockholder can have "more than one" vote. You can, but are not required to, allow different classes of stock to vote on different issues, such as hiring decisions, editorial choices, etc. 

• You can also require different financial commitments from different classes of stock. Different classes of stock can be sold at different prices. You can choose to require payment over time. See Mass. Gen. Laws Ch. 156B, § 22. 

• You can choose to issue stock in exchange for cash, property, or services. In this way, you can give employees (reporters, editors, etc.) different classes of stock than financial contributors or other types of stockholders. See Mass. Gen. Laws Ch. 156B, § 18. As mentioned above, Massachusetts law appears to allow giving these different people different voting powers, privided that each holder of voting stock gets a single vote regardless of the number of shares held.

• You can choose to set different rules for the transfer of different classes of stock. See Mass. Gen. Laws Ch. 156B § 13(b)(1). 

• If you wish, you may leave the question of different classes of stock to be decided by the board of directors. See Mass. Gen. Laws Ch. 156B § 26.

b. Decide on a management structure.

• The cooperative has broad powers—to make contracts, hold property, sue and be sued, and so on. The complete list of these powers is found at Mass. Gen. Laws Ch. 156B, §9. Remember that these powers are subject to the requirements of Chapter 157; for example, the power to distribute profits is limited by Chapter 157, § 2.

• 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 the shareholders. Mass. Gen. Laws Ch. 156B, § 54.

c. Decide how to distribute profits.

Cooperatives in Massachusetts are limited in how they can distribute profits. See Mass Gen. Laws Ch. 157, § 2. 

• Cooperatives must maintain a "sinking fund," a pool of money set aside to pay off long-term debts and obligations. Mass. Gen. Laws Ch. 157, § 2.

• To fill this sinking fund, the cooperative must set aside at least 10% of its net profits each time it makes a distribution to shareholders. Once the fund has reached a minimum of 30% of the value of the cooperative's issued and outstanding stock, the cooperative can begin to distribute all of its net profits. 

• Aside from the sinking fund requirement, you may choose to distribute profits as you wish (including both patronage dividends and shareholder dividends), but distributions must be made at least once a year.

d. Prepare your articles of incorporation and bylaws

• 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 different classes of stock in the cooperative, and any rules or restrictions attaching to the stock classes. See Mass. Gen. Laws Ch. 156B, § 13 for the complete list of information you must include in your articles of incorporation.

• The bylaws are a set of internal rules that govern most day-to-day activities and procedures of the cooperative. If you wish, you may include in the articles of incorporation a provision allowing the directors to make or change by-laws. If you choose to allow this, the stockholders still have the power to override the directors' changes. See Mass. Gen. Laws Ch. 156B, §17.

• Copies of the articles of incorporation, bylaws, and other records should be kept at the cooperative's primary office (or the office of certain officers). Mass. Gen. Laws Ch. 156B, § 32.

e. Hold an initial meeting.

• The incorporator(s) then hold a meeting to elect the directors of the cooperative and adopt the articles of incorporation and bylaws. See Mass Gen. Laws Ch. 156B, § 12 for more information on the initial meeting.

4. Get your Employer Identification Number, register employees.

• Request an Employer Identification Number (EIN) from the IRS. This can be done via its online application. There is no filing fee.

• If you have an employee or employees in Massachusetts (including corporate officers), you will need to register for Massachusetts withholding-payroll taxes using the Massachusetts Department of Revenue business registration page. If you have questions about business taxes, the Massachusetts Department of Revenue has many publications that should be able to answer your questions. The Guide to Employer Tax Obligations is especially useful.

• Whenever you hire an employee in Massachusetts, you must inform both the IRS and the Commonwealth of Massachusetts. 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 on reporting new hires at the Massachusetts New Hire Reporting Center website.

• If you have employees in Massachusetts, you must carry workers' compensation insurance. The Department of Industrial Accidents administers this program.

5. Register with the Commonwealth of Massachusetts.

• Submit your articles of incorporation to the Corporations Division of the Massachusetts Secretary of State's Office. The filing fees follow the standard for-profit schedule: $275.00 to file the articles of incorporation.

• The Corporations Division has an online system through which you can register your cooperative. You can also submit your documents via fax, or in person or through the mail.

6. Tax information.

• Cooperative corporations are taxed at the federal level in a special way. See our page on federal taxation of cooperatives for more information.

• Massachusetts, for tax purposes, generally treats corporations in the same way as the federal government. A for-profit journalism cooperative would likely file Form 355 for Massachusetts's corporate excise tax.