Community-Owned Corporation

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Description

"While cooperatives have a set of principles and a codified movement, the term "community-owned corporations" more loosely describes a wide range of traditional businesses with a social-enterprise component. In this spirit, several communities are currently developing community-owned stores that are not technically cooperatives.

The Adirondacks community of Saranac Lake, New York, (pop. 4,800) stopped a 120,000 square-foot Walmart from opening in 2006 by preventing the commercial rezoning of several key parcels. Gail Brill, a local businesswoman and community activist, noted while the anti-Walmart campaign was successful, Saranac Lake still needed more retail options. "We couldn't just be 'anti'," said Brill, "we had to say 'yes' to something." So they formed a committee to investigate ways they could create retail alternatives downtown – and avoid creating sprawl outside the community.

Ames, a chain of small, discount department stores, had closed in 2002 and nothing had filled its place. The committee was inspired by The Merc in Powell and invited one of its organizers to come to Saranac Lake. Fired up with enthusiasm, Saranac Lake quickly formed an interim board, retained a local corporate attorney, and registered their venture with the New York attorney general's office. As a first step, they developed a business plan, and in June 2007 they launched a stock offering. To maximize the project's feasibility, they decided from the outset to lease a property, instead of building new. Brill describes the people involved as "serious": they wanted a "real corporation" that included democratic principles, but was not a cooperative. Alan Brown, the group's treasurer, observed that members of the organizing group felt a for-profit corporation "would have broader appeal" than a nonprofit. Brill added that they wanted a for-profit store that would be "as American as apple pie."

Shares were priced at $100 and the capital needs were $500,000. In order to foster broad community ownership, the prospectus stipulates that investors may purchase a maximum of 100 shares, or $10,000 of company stock. As of December 2009, they had raised $415,900 – an accomplishment that surprised even Brill and Brown.

The money was raised entirely through grassroots efforts: the group organized house parties where a local host invited 20 guests to hear a presentation and pitch. Residents were encouraged to buy shares as gifts. People with summer homes in the area bought shares. The group sent direct-mail appeals and sold shares at the local farmers market.

The organizers cannot do much besides selling shares until they have reached the $500,000 goal specified in the prospectus. (In fact, because shareholders' money can only be used to capitalize the business, the interim board has had to organize additional fund-raising activities to pay for the costs – like printed materials, postage, etc. – associated with selling the shares.)

The prospectus lays out risks associated with the stock offering, but, as a practical matter, shareholders are making an investment in the community. If the group does not reach its goal, it will have to pay back all the money raised to date, with interest, and the board will be personally responsible for $25,000 in legal fees that would otherwise ultimately be paid out of the start-up capital. They have six more months, after which they can file with the attorney general for a six-month extension, but Brill and Brown are confident they will meet their goal. (Click here to see the prospectus of shares offered for the Community Store in Saranac Lake.) (http://www.preservationnation.org/main-street/main-street-now/2010/marchapril-/community-owned-businesses.html)


More Information

  1. For additional examples of community-owned corporations, visit http://communitybusinesses.blogspot.com
  2. Community-Owned Business