From Member-Managed LLCs to Cooperative Reform for Inclusive Economies

Amidst the global surge of refugees and migrants seeking economic opportunities, the call for inclusive, democratic, and cooperative models is more pressing than ever. With 2025 designated as the UN’s International Year of Cooperatives, there is a critical need to reform cooperative laws to ensure that no marginalized worker is excluded. This essay explores how inclusive and democratic cooperatives, alongside innovative models like member-managed limited liability companies (LLCs), can address these global labor challenges.

Imagine a world where everyone, regardless of their legal status, can fully participate in cooperative ventures. While member-managed LLCs provide a flexible and immediate stopgap solution for marginalized groups—including refugees, migrants, and undocumented workers—they are not the ultimate goal. Instead, they serve as a bridge toward the broader objective: reforming cooperative laws to fully embrace inclusivity and ensure equitable access to economic opportunities for all. This need for reform, along with the potential of innovative models like LLCs, was the focus of the event “Exploring Business Models for Collective Flourishing with Cooperative Principles,” held in the summer of 2024 and convened by the Platform Cooperativism Consortium and Democracy at Work Institute.

The Global Need for Cooperative Reform
Cooperatives have long proven their capacity to support marginalized groups, including refugees, migrants, youth, asylum seekers, individuals with disabilities, minorities, and formerly incarcerated people, by creating pathways to economic inclusion. These efforts, however, are often hindered by restrictive legal frameworks, limiting the scale and accessibility of cooperative solutions. In Kenya, for example, milk cooperatives require young people to own a cow to be able to join, which is prohibitively expensive for them.

Refugees also face significant obstacles in obtaining identification documentation, which prevents them from joining mainstream platform companies such as Upwork. Some national contexts make it extraordinarily difficult to obtain or renew refugee IDs, as seen in Ethiopia where the Ethiopian Refugee and Returnee Service has stopped registering newly arrived asylum-seekers, thus preventing them from accessing asylum processes and protection under international law. Research suggests that refugees may benefit enormously from platform cooperatives, yet this potential remains underexplored in the refugee context.

Despite these challenges, cooperatives in many countries have succeeded in addressing the needs of marginalized populations, illustrating their potential as transformative economic tools. For instance, in Italy, migrant workers have formed elder care and small-scale dairy cooperatives, offering dignified livelihoods and fostering integration. The ILO highlights the significant role of cooperatives in improving the livelihoods of both host communities and refugees in forced displacement contexts, with evidence from Jordan, Uganda, and Turkey. 

Near Rome, Barikamà, a cooperative of previously exploited undocumented migrant farm workers, now produces African yogurt and vegetables, enabling fair wages and even, in some cases, facilitating legal residency for its members. In 2016, an Italian federation of social cooperatives published a national charter to integrate migrants through cooperation with the public sector. Social cooperatives such as Auxilium manage high-quality migration reception centers, promoting integration and cultural diversity despite navigating structural barriers. Similarly, in Spain, Top Manta—a cooperative of mostly undocumented migrant street vendors—exemplifies how these models can create stability and empowerment. Beyond Europe, cooperatives in countries like the Philippines and El Salvador offer migrant workers key services such as insurance for repatriation, work-related deaths, and remittances. In India’s “Little Tibet,” Tibetan refugees maintain cultural identity and collective resilience through cooperative societies, monastic education, and cultural acculturation.

How Member-Managed LLCs Can Help
While examples of successful cooperatives worldwide demonstrate their transformative potential for marginalized communities, significant barriers persist due to outdated laws and restrictive frameworks that fail to address the needs of refugees, migrants, and undocumented workers. These legal challenges, combined with reputational issues from historical misuse and exploitation, undermine the credibility of cooperatives as equitable and democratic models. To address these challenges, alternative models must bridge the gap until more favorable legislation emerges.

Addressing these challenges requires exploring alternative models that can bridge the gap until more favorable legislation is in place. For instance, in France, nonprofits are often seen as a practical alternative to cooperatives due to simpler establishment processes and access to diverse funding sources. The case of CoopCircuits, part of the international Open Food Network, illustrates how nonprofits can transition to cooperatives, aligning with platform co-op principles. Similarly, the Worker Self-Directed Non-Profits model in the U.S. offers another potential pathway.

In the United States, member-managed LLCs offer flexibility by bypassing some of the barriers that prevent traditional cooperatives from addressing the needs of undocumented workers and other marginalized groups. Unlike traditional cooperative legal structures, LLCs internally organized as cooperatives allow individuals without work authorization to participate as business owners, using Individual Taxpayer Identification Numbers (ITINs) instead of Social Security Numbers. This structure enables undocumented workers to engage in cooperative ventures while avoiding legal pitfalls tied to traditional employment classifications. Furthermore, member-managed LLCs provide opportunities for worker equity and ownership without requiring the extensive regulatory changes needed to make traditional cooperatives more inclusive. Although not a permanent solution, member-managed LLCs serve as an effective interim model while legal and systemic reforms are pursued.

By addressing these legal gaps, cooperatives can become effective contributors to fair work, offering inclusive, democratic, and cooperative models globally. Of course, organizing refugees and other marginalized groups into platform cooperatives is not a panacea for the many challenges they face and there is a need for broader multinational and multilateral efforts to enable legal access to the global digital economy.  

Examples from the United States
In the U.S., Gowri J. Krishna, a Professor of Law at Fordham Law School, has highlighted how member-managed LLC cooperatives have become critical for undocumented workers, particularly in industries like hospitality, construction, and domestic work. The U.S. is home to approximately 11 million undocumented immigrants, two-thirds of whom have lived there for over a decade. Of these,  7.8 million are part of the workforce, accounting for 5% of the total U.S. labor force. Among undocumented immigrant men, 95% are working or seeking work, compared to 79% of U.S.-born men and 84% of lawful immigrant men. Undocumented workers make up 11% of employees in restaurants and bars and 22% of workers in private households.

Despite contributing significantly to the economy, undocumented immigrants face substantial barriers to financial stability. Fifty percent of undocumented immigrant households file income tax returns, paying 8% of their incomes in state and local taxes—totaling $11.74 billion annually—and contribute $13 billion to payroll taxes while receiving only $1 billion in benefits. Member-managed LLCs that are internally organized as cooperatives provide these workers with a pathway to economic security by sidestepping employment laws that would otherwise exclude them.

Krishna has worked with community-based organizations in New York City that focus on creating and scaling LLC cooperatives in low-income, immigrant communities. These cooperatives have raised workers’ earnings from $14 per hour in exploitative jobs to $33 per hour in dignified work. They now benefit from safer working conditions, reduced working hours (21-40 hours weekly instead of over 40), access to legal counsel, business insurance, and equitable ownership structures. This model has transformed jobs in domestic work, childcare, and elder care into dignified, secure livelihoods.

Anh-Thu Nguyen, Director of Strategic Partnerships at the Democracy At Work Institute, has expanded on the potential of LLC cooperatives for excluded workers, including undocumented individuals, caregivers, gig workers, and freelancers. Her model focuses on small, member-managed LLC cooperatives capped at 15-20 members, ensuring strong individual ownership and collective decision-making. These cooperatives share resources and back-office support while working with community-based organizations that act as special members, maintaining operational integrity. Through partnerships with worker centers and universities, Nguyen’s approach has enabled low-wage workers to build stable careers, access income-generating opportunities, and gain entrepreneurship experience in the mainstream economy.

The success of these models is further reinforced by organizations such as the Sustainable Economies Law Center and the Democracy at Work Institute, which provide  legal guides and templates for limited liability company worker cooperatives. These resources empower marginalized workers to navigate complex legal systems and establish cooperatives that uphold cooperative principles while addressing immediate economic needs. Additional examples of limited liability company cooperatives in California, such as Courage Cooperative, are featured in a recent report by David Levine and his team. This report, developed as part of the Promote Ownership by Workers for Economic Recovery Act, AB 2849, examines the economic impact of worker ownership and explores how California state policy could foster the growth of worker-owned businesses as a high-road employment model for low-wage workers, including immigrants. By leveraging these frameworks, member-managed limited liability companies continue to emerge as a practical and impactful alternative for workers excluded from traditional employment and cooperative structures.

The LLC worker co-op model for undocumented workers in the U.S. sparks a global discussion on how refugees can benefit from worker cooperatives. Refugees, 76% of whom are in low- and middle-income countries with scarce local jobs, face employment barriers such as language, cultural challenges, and employer discrimination. Additionally, 74% of refugees live in countries that significantly or severely restrict their de facto right to work, even if they have the legal right to work. Worker cooperatives offer a pathway to economic integration and equal opportunities, and where appropriate, platform cooperatives may provide entry into the formal economy.

Guarding Against Risks of Co-optation and Dilution of Cooperative Principles
While member-managed LLCs address immediate needs, they risk misuse by pseudo-cooperatives, underscoring the need for stronger legal safeguards to protect their equity-driven mission.  To that end, CICOPA’s World Declaration on Worker Cooperatives defines worker cooperatives as organizations that prioritize sustainable job creation, wealth generation, and quality of life improvement for worker-members through democratic self-management, equitable compensation, community development, and adherence to universal cooperative principles like autonomy, open membership, social responsibility, and solidarity.

Broader legal and international cooperative frameworks provided by organizations like the International Cooperative Alliance and the International Labour Organization play a critical role in guarding against pseudo-cooperatives from exploiting legal loopholes to avoid employer responsibilities. Santosh Kumar,  Director of Legislation at the International Cooperative Alliance’s Global Office, discussed the exploitation issues in South Africa’s pseudo-cooperatives and the need for improved legal frameworks to protect worker cooperatives, particularly for undocumented workers.

Member-managed LLCs must adhere to ICA’s cooperative principles and values, avoiding any perpetuation of harmful labor intermediation. Member-managed LLCs must follow the ICA’s cooperative principles and values, ensuring genuine member management to uphold workplace democracy. For those including undocumented workers, this is especially critical, as failing to maintain true member management could result in worker-owners being reclassified as employees, potentially leading to deportation.

Santosh Kumarsuggested federating LLC cooperatives under a federal Cooperative Act, creating a unified legal framework aligned with cooperative principles. He stressed the importance of creating clear bylaws, offering training for cooperative promoters, and establishing a voluntary reporting system to ensure transparency and adherence to cooperative values. Additionally, he suggested implementing a self-managed redressal mechanism—an internal process for resolving grievances and disputes—to address issues within LLC cooperatives. This approach aims to uphold accountability, fairness, and cooperative principles while enabling worker cooperative legislation that allows for cross-border membership and inclusion of undocumented workers. To prevent LLC degeneration and strengthen cooperative identity, Kumar suggests federating LLC worker cooperatives under a second-order cooperative, as seen with Up&Go in the United States and The Mobility Factory, a shared-services platform for electric car-sharing cooperatives in the EU.

Not all experts agree that LLCs are the best structure for worker cooperatives. While some argue that LLCs can provide a flexible and practical framework, others, like Hagen Henrÿ, a cooperative law expert and former Chief of the Cooperative Branch of the International Labour Organization (ILO), emphasize the importance of adhering to established cooperative laws. Henrÿ highlights key texts such as the 1995 ICA Statement on the Co-operative Identity, the 2002 ILO Recommendation 193, and the 2021 UN Secretary General’s Report on Cooperatives in Social Development, which enshrine cooperative principles and guide their role in sustainable development.

Henrÿ contends that worker cooperatives should register under general cooperative law rather than relying on LLC structures, even in the absence of specific legislation, to ensure compliance with cooperative principles. He argues that public international cooperative law, based on these and other foundational texts, obligates states to incorporate cooperative principles into their domestic legal frameworks. This perspective underscores the ongoing debate about whether LLCs can truly uphold cooperative values or risk diverging from their foundational principles.

Santosh Kumar and Hagen Henrÿ stress the importance of indivisible funds in worker cooperatives, where profits are retained to ensure sustainability and resilience, especially during crises or transitions. While LLC worker cooperatives aren’t required to have such funds, adopting them as a best practice through bylaws or operating agreements can help maintain cooperative integrity and balance with business models.

The ICA’s global network of legal experts in tandem with governments, must address legal gaps through an action plan promoting inclusivity, democracy, and cooperation. Santosh Kumar emphasizes the need to legalize transnational cooperatives, particularly in the Global South, to expand the movement and advocate for laws supporting cooperative rights and responsibilities. Legislative reforms should include provisions for marginalized workers and secure benefits like workers’ compensation and pensions without undermining worker-ownership.

The clear recommendation of the authors is to experiment with member-managed limited liability companies (LLCs) and other legal vehicles until legislation enables the integration of marginalized groups like refugees, women, youth, and undocumented workers. To implement member-managed limited liability companies in regions like Kenya, for platform coops for ride-hailing, these LLCs should be structured and operated as worker cooperatives, even if legally registered as LLCs. Practical steps include designing LLC operating agreements that incorporate worker-ownership, democratic decision-making, and profit-sharing mechanisms typical of worker co-ops. Additionally, these LLCs should implement strong governance practices, such as regular member meetings and voting processes, to ensure they genuinely reflect cooperative values. In practice, these platforms should prioritize worker control and inclusion, offering equitable access to benefits like profit distribution, training, and workplace conditions, all while aligning with local legal frameworks for LLCs.

The current global crises demand innovative legal models and adaptable frameworks for collectives and platform cooperatives—frameworks that prioritize equity, democracy, and economic opportunity. Now. The UN International Year of Cooperatives in 2025 provides a propitious context for advancing this critical experimentation.