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I've learned through discussions with various people I've met in Rhode Island that there are many co-ops operating throughout the state that have never filed any kind of paperwork with the state government. For example, I think that the Secretary of State requires one to file articles of incorporation for many (perhaps all?) business entities formed in RI, but I've encountered more than ten different people who claim to be operating a co-op and who have also never filed any forms with the Sec. State.

This seems like an attractive option to me, but I'm skeptical that it is actually permitted by state law. Can anyone speak from experience on the legality (and if it is allowed, also the wisdom) of this choice? In particular, where (if anywhere) does the law elaborate on this type of business entity? I'd like to know specifics such as whether or not there are annual income limits and number of co-op member limits before the state will consider the co-op illegal.

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    @MDMoore313, thanks for your suggested edit, but replacing the word, "co-op" with the word, "business" is a rewording of my question that changes its scope fundamentally. I'm trying to learn more about state law regarding one specific type of business entity, a co-op. So although I appreciate the suggestion, I did not accept the edit. I think you and/or others may be able to override that of course. No hard feelings if you do so. – Osteoboon May 22 '13 at 12:26
  • This seems far more like a legal question and would probably fit better on law.stackexchange..com – Scott Oct 15 '16 at 15:12
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I cannot give legal advice, but what I can say is that legalizing your business entity has several benefits, the main one that I find attractive is

Protection against lawsuits

If someone decides to sue your business, but legally no business actually exists, then they can come at you both as individuals and sue for your individually owned assets including houses, cars, and whatever else, and there you really have nothing preventing them from doing so.

If there was an actual business however, even just an LLC, then they could only come after the company's assets, not to mention you'd also be operating within the full scope of the law.

In short, you'd be playing with fire. Many people also drive without a license, but I wouldn't do that either.

  • Yes I realize that, but a co-op may be (I think) a rather unusual business entity in that every person working with the co-op is considered a co-owner in some degree or another. I'm very curious to work out the details of this twist (if indeed there really is one). I suspect that the only answer I'd be willing to accept is one that points to some specific federal or state law with details. – Osteoboon May 22 '13 at 12:28
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Some states have exceptions for non-profit associations, and a co-op could be legally organized as a non-profit association.

For example, Texas allows "Unincorporated Nonprofit Associations" under the Uniform Unincorporated Nonprofit Association Act, Chapter 252 of the Texas Business Organizations Code ("BOC"). As the name implies, these organizations are not required to incorporate.

These co-ops you mention may be operating under a similar law in Rhode Island.

Laws vary by state, so be sure to do your research before deciding on a legal structure. If necessary, get advice from an attorney.

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