Forming a Creative Code & Technology Co-operative
This is adapted from a talk given by Ramsey and Andy at NYU Game Center on April 28th, 2022. Thanks to Jane Friedhoff for helping us adapt it to a blog post.
What is a technology co-op? Why would you want to form one? And how on earth do you go about doing it?
In this post, we’ll introduce you to the core of EMMA: how we created it, how we operate it as a group, and what needs it’s helping us fill that non-co-op work didn’t give us.
But first, a few disclaimers:
- Every co-op is different and special, and we can only speak to our own experiences. Your mileage may vary! We can only tell you what we’ve done, and the particular path we took to get here. Think of this not as a guide, but rather an example.
- EMMA is a service co-op, not a product co-op. This is an important distinction: a product-oriented co-op (say, a videogame co-op) or a co-op in a materials-heavy industry like construction will likely require much larger overhead and startup costs before they can recoup their initial investment. As a service co-op, our overhead is very low and our startup costs were minimal. This, plus decades of individual experience with the creative coding market as a whole, gives us a lot of freedom that other businesses might not have.
With that out of the way, let’s get started!
What is EMMA?
EMMA is a state-recognized software consultancy co-op located in New York State, which went official in January 2022. We write software for clients on a contractual basis, usually in the interactive software industry (e.g. videogames, public installations, VR/AR, web experiences) but we’re willing to take on work wherever we have expertise. Depending on who you ask, the name is either an homage to Emma Goldman (an amazing anarchist of the early 20th century), or an acronym: Everybody Making Money and Art.
Operationally, we use a consensus governance model with a proportional compensation structure: that is, we all make the decisions together as equals, and we get paid relative to how much we work. We only have one class of member: there’s no difference between founders and folks who might join later. We also rotate responsibilities, and very actively stay in touch with each other to make sure everyone understands how everything works and feels empowered to act on the co-op’s behalf.
Fiscally, members keep 70% of whatever client money they bring in, with 30% going to EMMA to cover costs and future salaries. If a member brings in less than a pre-agreed “base salary” due to a dry spell or life circumstance, they get that base salary.
Legally, we are a New York State Domestic Cooperative Corporation, also known as a Worker Cooperative. While we resemble a more conventional corporation, we’re not an LLC or S-Corp, for reasons we’ll go into later. We are all simultaneously owners and employees, and the same will be true of future hires.
Spiritually, we’re a group of weirdos who dream of spending our time making art, not grinding work.
Before we go into the logistical details of running your own co-op, let’s talk about how the four of us gravitated towards the idea of starting one.
All four of us–Ramsey, Andy, Gwen, and Ivan–have been in the creative code and technology world in different capacities for decades. Andy, for example, co-led an indie games company, left that to teach game design, and landed in creative technology consulting. Ramsey had likewise been freelancing in creative technology since 2010, in addition to his games, art, and research practices. Gwen moved directly from university into traditional salaried employment in the creative technology industry. However, she found herself freelancing in 2020-21 as a consequence of covid making temporary work more readily available. Ivan has been working professionally as a creative coder since 2005. He has been freelance for most of this time, taking breaks to lead creative technology teams and teach game and graphics programming.
Although all of us came from different work backgrounds, we discovered we had all quietly been looking for the same thing. Many of us came from arts and indie videogames, and found the constant hustling those fields required to get even scraps of funding to be exhausting and draining. The COVID-19 crisis highlighted just how much control our various employers had over our lives and safety: those of us who were teaching, for example, were given baffling demands that we return to office during outbreaks or lose our jobs (and health insurance). Ramsey counts the October 17 Revolution in his native Lebanon as a pivotal moment that made it clear to him that a better world was both possible and worth building right now.
In our earliest discussions, we found that we all wanted basically the same handful of things:
- The possibility of making enough money to live comfortably, while having enough time to make art (making art is great, but paying rent with art is exhausting).
- The security of having a predictable salary (tricky for a job as boom/bust as freelancing).
- The agency to work in a way that aligns with our values (instead of those of some executive board or shareholders).
- The satisfaction of knowing our money and labor is building a structure that we value (and supporting people that we value).
- The opportunity to do interesting work if possible (we reject actively harmful work, but are also happy to be plumbers for digital toilets).
Non-cooperative structures could have provided us some of these things (with much less legal hassle) but with a variety of tradeoffs we did not want to make. We were lucky enough to have been exposed to quite a few other co-ops, some run by people we knew personally. Feel Train, for example, was a creative tech co-op from 2015-2019, with co-owners Darius Kazemi and Courtney Stanton sharing their bylaws and documents to the public (We strongly encourage you to check those out!). KO_OP, Soft Not Weak, and Motion Twin are all co-op game studios that also influenced our decision to go co-op. These were enterprises run by people we respected, making work we loved, and watching them do so while exploring more radical modes of labor was a huge inspiration.
There are a few lenses on how EMMA works: our internal conceptual model for the co-op; the logistical model of the co-op; and how this model was encoded into the legal structures afforded to us by the state. Let’s go into each.
How EMMA works, conceptually
What values guide our processes about and within EMMA?
EMMA is a financial capacitor
As we said before, EMMA uses a proportional compensation structure, meaning we get paid relative to how much work we bring into the co-op.
We see EMMA as a kind of financial capacitor. A capacitor is an electronic device that can store a charge of electricity and discharge it slowly, over time. This consistency is welcome in a field like freelance software development, which has booms and busts: periods of lots of work, and periods of no work at all. The idea of EMMA is to pool resources–to metaphorically charge the capacitor–during booms so that we can pay salaries during busts.
This interdependence is a welcome support network for an erratic field. On our own, the chance of any one of us not having work for a given season is reasonably high. But if we all come together, the odds that absolutely no one has work are low. The capacitor is always getting charged by someone, which provides security for everyone.
EMMA supports our art practices
As you might imagine, the fiscal and even psychological security of having a guaranteed income stream makes it a lot easier for our members to have the time, energy, and resources, to pursue our own art. All four of us have artistic practices, and that is not a coincidence. A top-level goal of EMMA is to support the non-marketable art that its members make, and free them from having to depend on selling art (and the concurrent market forces around art) to survive.
EMMA minimizes work
Although EMMA’s business model is creative code consulting, we do not dream of labor! We want to work enough to live comfortably, and then stop when possible. This seems obscene in a world that expects constant exponential growth–but working less is an explicit goal of our co-op, as we want our members to be able to pursue projects that they find valuable for their own sake, as we said above.
Knowing when to stop working/start turning down work can be hard when you’re on your own: even if you make a lot, there’s always a future fallow period to worry about. But within the co-op structure, we can set common financial goals and identify when it’s financially safe to turn down work.
EMMA is a small node in a (hopefully) bigger mesh
Although we don’t have an exact number, EMMA will always remain small–likely fewer than 8 people. The governance of the organization can really only work with a small number of members: consensus decision making often doesn’t scale well beyond a small group.
Furthermore, it is critical to us that all members know and respect each other–not in a general be-nice-to-each-other way, but in a way that requires everyone knowing each other well and being invested in each others’ success. This also functions best with a small group.
And just because EMMA is small doesn’t mean that its dreams are! Our dream isn’t that we run the One Giant Co-op Everyone Joins: rather, we’d love to see a future of many, many co-ops self-managing themselves, tailored to their respective members’ needs. In the ultimate version of this, we would see cooperative workplaces collaborating with each other by sending delegates to industry syndicates to discuss and solve industry-wide issues. These syndicates would then send delegates to regional federations, with power and decision-making rising from the bottom up. This isn’t some thing we’ve conjured up, similar structures can be found in classic anarcho-syndicalist and more contemporary democratic confederalist theories and is being put into practice in places like the Autonomous Administration of North and East Syria. Being small is a feature, not a bug.
How EMMA works, logistically
So how does EMMA actually function day-to-day?
EMMA is run by consensus governance
When we say “everyone decides” you might assume that we either vote on fixed proposals or require unanimous decision-making. In actuality, we do neither. We treat decision making as a conversation, where a given proposal often changes over the course of the conversation, and where responses may fall on a spectrum from “I love it” to “this is OK” to “I hate this and I’ll leave over it.”
This is an unusual way for a corporation to operate, but is actually pretty straightforward in practice, and works well with a small group like ours: as Ivan says, “it takes you longer to make decisions, but the quality of the decisions tends to be better.”
This isn’t totally foreign to the tech industry, either. The IETF, which writes and maintains many load-bearing protocols that hold up the internet, is deeply committed to what they call a “rough consensus” process that avoids the will of a majority eclipsing the needs of the minority. If you ever wonder if this consensus stuff could actually work at scale consider the fact that you’re reading this blog post delivered to you over several IETF protocols as evidence that it does!
Spoiler alert: lawyers did not like this! “Infinite growth” is basically an axiom of modern business: all the structures around making one assume that the goal is to just keep scaling up forever. But our consensus governance model doesn’t scale all that well–doing it with four people is a lot easier than trying to do it with four hundred. We had a lot of back and forth with our lawyers that we understood and did not mind this!
EMMA uses proportional compensation
You also might assume that everyone is paid the same amount at EMMA, and this is not the case either. Everyone is paid the same way, but not necessarily the same amount.
Some co-ops do make it a point to pay everyone the same amount. It’s a perfectly valid approach, and we considered it at first, but we realized that it was not a good fit for EMMA. After all, different people have different life needs. Some may be happy to couch-surf, while others may be itching to buy a home. Some may have zero dependents, while others need to take care of family. Some may be keen to work absolutely as little as possible, while others may want to work more and build out their emergency funds. Additionally members will almost certainly wind up moving within that spectrum, and possibly in a big hurry! Having just one rate for everyone bulldozes over these various individual considerations and desires.
Rather, at EMMA, everyone is paid with the same method. Everyone keeps 70% of whatever they bring in, with 30% going to EMMA to cover operating costs and future salaries. In addition to that, as a safety net, if someone has a rough month and brings in less than a collectively agreed on base salary, no problem: they get paid the base salary anyway, thanks to our financial capacitor. This covers both dry spells and slow client payments. This structure allows people to work different amounts and come away with different amounts, which helps us support members regardless of their current life situation.
However, being paid different amounts doesn’t affect our governance. After all, a company could have a flat pay structure, while having an operational hierarchy. We have the opposite: while we make different amounts of money, each member always has the same decision making power within the co-op.
As a co-op we have access to certain kinds of corporate profit accounting that other legal entities do not. Specifically, we have at our disposal mechanisms to share EMMA’s end of year profit with members in novel ways. We have not enacted any of these mechanisms, however, as we have not been in business for more than a year. As of now the profit sharing plan is basically a spill-over. if 30% of EMMA's revenue is more money than we actually want to keep in the co-op we can use profit sharing to distribute that cash back to the members.
EMMA has one class of member, and everyone does everything
At EMMA, we have exactly one class of worker-owner: the “member.” There is no hierarchy among members, and when other members join down the line, they will be exactly equal to the founding members following a candidacy period.
It’s worth noting that not all co-ops are like this: it is not a legal requirement. The principles just call for “democratic member control,” which could allow for hierarchy. (Some larger co-ops have, for example, boards of directors and managers forming a more traditional looking corporate hierarchy. These positions are chosen democratically by the worker-owners, however). Given our small size and the political inclinations of some of our members we opted for a flat governance structure.
In addition to not having a hierarchy, we don’t want our members to get siloed into operational roles: we want everyone to do everything, at least a little. A practical example is our books. Every member of EMMA is trained to maintain the company’s books, and updates the relevant ledgers to reflect their own client work as well as general company transactions. Another is our payroll system: we rotate who actually operates the software and moves the money around, while the rest of us sit in on a video call to provide guidance and a double-check work.
This system of shared responsibilities has a lot of benefits. First and most pragmatically, this avoids the “hit by a bus” problem: if Ramsey is the only one who knows how to do the payroll software, but he gets hit by a bus, how will EMMA pay its employees in his absence? Much better to spread that knowledge out so that everyone feels competent at taking on a given role within the organization.
Second, this system makes our worker democracy more meaningful. Micheal Albert makes the argument that traditional division of labor in a cooperative runs the risk of eroding the collective’s democracy and creating a “coordinator class” of people who know how to run the enterprise at a higher level distinct from everyone else. For example, even if Ramsey didn’t get hit by a bus in the previous example, if he’s the only one who knows how payroll works, how can the co-op discuss payroll-related issues as equals? So we make it a point to share knowledge and make sure everyone gets their hands dirty in all aspects of running the ship.
How EMMA works, legally
How do we make sure the state isn’t mad at us?
First of all, we should disclaim yet again that there are many ways to approach incorporating a co-op. Some of our decisions were made to best fit our specific needs; some were made because we had certain freedoms that gave us more options (like having cash on hand to get set up); and some were likely mistakes we made because we didn’t know any better at the time! Talk to us in a few years when we have the benefit of hindsight.
All this just to say: the following isn’t a guide, and it is most definitely not legal advice, just an example of how we did things.
EMMA is a NYS Domestic Cooperative Corporation (Worker Cooperative)
On a technical level, we are a NYS Domestic Cooperative Corporation, or a Worker Cooperative. NYS has a legal entity that fits our needs and values so we went for it – this will be different in different states! We resemble a corporation, in that EMMA is a “legal person” that is taxed separately from us, but one where we are all owners and employees. We are compensated for our labor throughout the year and share in profits at the end of the year (there are co-op-specific mechanisms for this, although we have not had a full financial year to actually test any of them).
As a state-recognized co-op, we get some special benefits, as well as a handful of restraints that we actually really like.
New York State law requires us to act and govern ourselves as a co-op. This is both a restriction and a perk! This requirement makes it difficult to “stop being a co-op” if future members try and do that. This happens enough in co-ops that it has a name: demutualization. In S-corps and other similar entities that are set up to be co-ops via their bylaws alone, it is possible for the members to vote to demutualize at a later date. We want to make that as hard as possible.
And, of course, we get to legally be called a cooperative in our company name and get a .coop URL, which is pretty neat.
The main downside is the added complexity of setting up this corporate structure. Online incorporation platforms like LegalZoom do not have “cooperative” as an option, so you will need to engage some lawyers to draft and file your paperwork for you. There’s no reason a “LegalZoom for Cooperatives” could not exist, but figuring that out is an exercise left to the reader.
EMMA “totally has a hierarchy” ;) ;)
Remember our whole “no hierarchy” thing? Turns out that NYS requires every corporation to have a president, vice president, and treasurer. Boo! But rather than tangle with the law, we decided to get around this requirement by simply stripping those positions of any and all unique powers in our bylaws, and choosing them by dice roll. We will rotate positions each year, but we made sure that legally, they did not matter.
As part of our process, we also had to explicitly request one class of member, one class of stock, and so on. Our bylaws require all employees, owners, managers, officers, directors, shareholders, etc. to all be the same ‘person.’ Likewise, there is only one class of stock, and any member can only own a single share. Most of this was outside the default, and not obvious to the state/lawyers, so we had to explicitly request it.
How EMMA pays taxes
This part is speculative because we haven’t been incorporated for a full year at the time of this writing, but we intend to file our end of year corporate taxes as what’s called a “T-Corporation.” This is a corporation that files under the rules in subchapter T of the IRS code (the subchapter right after subchapter S that gives S-Corporations their name!) and files form 1120-C as opposed to the 1120 that conventional corporations file. Subchapter T and 1120-C are the cooperative specific tax rules we are subject to.
There are a few bells and whistles here in terms of how we’re allowed to retain and share profits, but given that we haven’t gotten this far yet we can’t really comment deeply on any of it. In theory, we can do a kind of end of year accounting unique to co-ops that might allow members to keep more of the money they made during the year compared to conventional forms of compensation. Also, we can more easily use EMMA as a “cash warehouse” meaning we can retain an unbounded amount of cash at the company without incurring extra taxes. This is important when we’re trying to keep that capacitor charged! Again, given that we have not been open long enough as of the time of this writing to have crossed a tax year boundary, this part of the structure is still speculative. Check back in with us in a year!
[Hello, 2023 EMMA here and we have some hindsight now. Much of this document is good, and the core goals and ideas laid out can work. However we've found that issuing a “commission” is a specific stumbling block both legally and tax-wise. Our best advice is to consult with Lawyers and CPAs early and often!]
EMMA uses professionals to help manage all this
There is no way we could have done all this on our own. The process of incorporating and maintaining our money requires people with expertise we simply don’t have!
By and large, we tried to stick with organizations that aligned in some way with our values. This mostly meant working with other co-ops. There was typically a trade-off in convenience and accessibility, but it was nice to work with folks who not only shared our political goals, but who also tended to have a better understanding of what a co-op even is.
Our legal counsel was provided by JL Weiner & Associates whom we liked working with, and would recommend. We bank with Brooklyn Co-op FCU, got bookkeeping guidance from A Bookkeeping Cooperative, and used Gusto to run payroll.
Benefits we get of being part of a co-op
We’ve already mentioned some clear benefits of being part of a co-op–the financial capacitor aspect being a key one. For a while, it seemed like that was the primary thing we’d get out of it. And don’t get us wrong–that’s plenty great on its own! But even long before we were officially incorporated, we started seeing a lot of other benefits too.
It provides mutual support and a framework for knowledge-sharing
Work is hard! Freelancing involves a lot of interpersonal and operational skills that can be overwhelming: everything from doing taxes to dealing with stubborn clients to negotiating rates. And if you work in a field where things are constantly changing–like ours, where new technology is getting introduced, frameworks are getting changed, and software updates are constantly wrecking past projects–it can be very stressful to take on a new project solo. Having a team of people away from clients to lean on when things are confusing is invaluable.
This mutual support really comes in handy when we run into the kinds of technical issues mentioned above. We’re all creative coders, but even so, we all have different skills and specialties. Each of our members is an expert in at least one thing that the others know very little about. Our tech support channel in our self-hosted MatterMost (an open source Slack clone) is a wildly helpful resource whenever any of us run into issues on the job.
Furthermore, this knowledge-sharing doesn’t end when the gig does. While we come to each other to solve specific problems, we also find that the co-op structure encourages genuine ongoing learning and mentorship.
It makes it easy to share gigs
If you’re freelancing during a boom period, you may get solicited for more work than you can take on. It takes a bit of time and effort to reply to a potential client with a curated list of other people who might be able to do the gig well. But with a co-op structure in place, it’s as easy as saying, “I am booked, but let me check with my cooperative!” and passing the work on to them. Indeed, we’ve already shared gigs and bookings (at the time of this writing, we’re all booked on the same client!). And this added income supports all of us in the end.
This sets us up as a kind of stable of experts who can be brought on for a client’s project as needed. Ivan compares it to going to your favorite barber shop as a walk-in: your absolute favorite barber might be busy, but you know that everyone working there is good.
It gives us better negotiating power
A lot of freelancing stress comes from money (surprise!). As individuals, we’ve all needed and given advice to others who are struggling to set their rates, or trying to write an email gently reminding a sluggish client to pay.
But as a co-op, it’s easier to ask for money, and easier to get that money. We’ve already used ‘email@example.com’ to remind clients of a late invoice to very positive effect. This faceless collective email account helps avoid the discomfort of personal client confrontation.
Further, we are able to bounce rates off each other, and treat rates as standard across our co-op. This is doubly important given the many pay inequality issues in tech (across race, gender, etc.). When we work separately, and when wage information is effectively secret, it’s easy for clients to nickel and dime us individually. But when we share our rates and bargain together, we can provide a unified front for more fair compensation for everyone. A rising tide lifts all boats!
Advice for starting your own co-op
Hopefully, we’ve given you some practical insights into how you might conceive of, form, and run your own co-op. But before we sign off, a few pieces of advice:
Co-op structures do not guarantee success
Hopefully obvious, but being a co-op does not on its own guarantee success. EMMA is doing well right now, but that’s in part thanks to the fact that we were all doing well as freelancers before EMMA. We were able to bring professional networks built over decades to the co-op, and that’s certainly bolstered our current business. We don’t want to give the impression that adopting a cooperative structure is a guaranteed recipe for financial success! You still have to succeed as a business in conventional ways.
You can test drive a co-op today!
Before we were a state-sanctioned cooperative corporation, we spent about a year unofficially acting like one. We had weekly meetings hosted on a friend’s personal Slack, where we’d talk about work and hold each other accountable to our various career and artistic goals. This regular communication made it easy and convenient to share gigs, give advice, and help with rate negotiation, allowing us to build solidarity by lifting each other up. A year of doing this gave us a strong working relationship, and an investment in each other’s success and happiness long before any paperwork was filed.
The nice thing about this is that you can do it today, no government forms required! If you’re interested in starting a co-op, try building a habit of normal meetings with your desired collaborators, and creating platforms where you can share your advice/expertise/networks with each other. Even if you don’t end up starting a co-op, you’ll likely find that you get a lot of benefits having this space to work together rather than apart.
We hope this was helpful to you! If you want to see what we’re up to you can check out emma.coop (love that .coop domain) or follow us on social media: https://twitter.com/emmacooperative https://www.instagram.com/emma.cooperative/
When we gave this talk at NYU, we closed by linking to these resources that were mentioned in the lecture. They helped us and hopefully they can help you too!
institute.coop — Democracy at Work, resources on forming and running a co-op
feeltrain.com/blog/operating-agreement/ — Feel Train documents