Skip to content
Getting Started15 min read

Generate Bylaws

Learn how to use the AI formation wizard in the Formation Studio, edit your draft Articles and Bylaws, and take them through member ratification and legal review.

AI Bylaws Drafting & Cooperative Incorporation

Bylaws are the binding constitution of a cooperative business. They define how decisions are made, how surplus is divided, and how the cooperative governs itself. OwnFold’s AI formation wizard drafts first versions of your Articles of Incorporation and Bylaws from the choices you make and the member classes in your Ownership Designer.

1. The Formation Wizard

Start the wizard from the Formation Studio (create at least one member class first). It walks you through four steps:

  • Model Type: Worker Cooperative, Multi-Stakeholder Cooperative, Employee Stock Ownership (ESOP), or Perpetual Purpose Trust.
  • Jurisdiction: The filing state and the entity wrapper (Limited Cooperative Association, Worker Cooperative Corporation, or Cooperative LLC).
  • Governance: The board model: at-large elections, class-based representation, or a direct collective with no board.
  • Generation: Confirm and generate. Each class's buy-in, voting rights, profit-sharing rule, lockup, payout period, and any preferred dividend are written into the drafts.

Generating a document set uses 50 AI credits (credits are refunded if drafting fails). Regenerating replaces earlier unsigned drafts only. Topics the wizard does not ask about, such as quorum thresholds or dispute resolution steps, should be reviewed and edited in the draft to match your committee's decisions.

2. Choosing a Jurisdiction

Corporate law is jurisdiction-dependent. The wizard currently offers California, Colorado, Delaware, and Vermont, and passes your choice to the drafting step. The AI draft is a starting point, not a statute-checked filing. Background on two common choices:

Colorado (Article 56 - Cooperative Associations)

Highly popular for worker and purchasing cooperatives. Article 56 provides broad flexibility in structuring member classes and voting, making it a common choice for multi-state consumer or worker co-ops.

Delaware (General Corporation Law with Co-op Provisions)

Delaware does not have a dedicated cooperative statute. Instead, cooperatives incorporate as a Delaware General Corporation and use custom charter provisions and bylaws to restrict shareholdings to 1-member-1-vote and mandate Subchapter T patronage.

3. Reviewing & Editing Drafts

Open either draft from the Formation Studio or the Legal Hub to read it, switch to edit mode to change the text, and save. Every draft ends with a notice to review it with a qualified advisor before filing. If you change your member classes later, use "Sync to Bylaws" in the Ownership Designer to refresh the membership article.

4. Ratification & Legal Review

Once the drafts are ready, the Formation Studio's readiness panel helps you finish the formation packet:

  1. Create First Vote: Opens a Governance proposal to ratify the formation packet, listing your drafts and member classes.
  2. Compile Board Packet: Bundles the drafts and the ratification proposal into a printable board packet.
  3. Review & Signing: In the Legal Hub, Articles and Bylaws need attorney approval and a board resolution before they can be signed. Executed documents are sealed in the Document Vault.
  4. Filing Checklist: Track filing with the Secretary of State, requesting an EIN, opening a bank account, and funding member buy-ins.

We recommend sharing your drafts with a cooperative attorney (you can find one in the Advisor Marketplace) for official legal clearance before filing.