HARRISBURG, PA — Pennsylvania lawmakers have approved legislation reducing the minimum number of workers required to establish a cooperative business from five to three, lowering a legal barrier for employee-owned startups and business conversions across the state.
House Bill 135, sponsored by state Rep. Rick Krajewski, a Philadelphia Democrat, passed the state Senate unanimously Monday in a 50-0 vote. The measure now heads to Gov. Josh Shapiro for consideration.
The legislation would amend Pennsylvania’s cooperative formation requirements, allowing smaller groups of workers to establish businesses under a legal structure designed for cooperative ownership and governance.
Under existing law, at least five workers are required to form a cooperative. That threshold can prevent smaller enterprises from organizing as cooperatives when they begin operations.
According to Krajewski, entrepreneurs who cannot meet the requirement frequently establish limited liability companies instead. Converting those businesses into worker cooperatives later can require additional filings and legal expenses.
Reducing the threshold to three workers would allow more startups to adopt a cooperative structure from the outset, potentially avoiding the costs associated with reorganizing an existing business.
“This is commonsense, bipartisan legislation which will make it easier to start a worker cooperative,” Krajewski said.
Worker cooperatives are businesses owned and governed by their employees, providing an alternative to conventional ownership arrangements.
The proposed change would affect business formation requirements rather than impose new obligations on companies operating under other ownership structures.
Corey Reidy, cooperative development director at the Philadelphia Area Cooperative Alliance, said the legislation could benefit both newly established businesses and existing enterprises seeking to convert to employee ownership.
“This is a small change which will have a huge impact for start-up and conversion worker-owned and democratically run cooperative businesses,” Reidy wrote in support of the measure.
Supporters argue that simplifying the formation process would make Pennsylvania’s cooperative business structure accessible to smaller enterprises that otherwise might organize as LLCs.
Ryan Kudasik, a founding member of the Keystone Tree Crops Cooperative, also supported the legislation, pointing to the role cooperatives already play in Pennsylvania’s economy.
“Cooperatives are an essential part of the business landscape in Pennsylvania, with over 400 enterprises operating in farming, housing, energy, finance, and more,” Kudasik said.
The figure encompasses cooperatives across multiple industries and ownership models, rather than worker-owned businesses alone.
Krajewski characterized the Senate’s unanimous approval as evidence of bipartisan support for reducing barriers to cooperative business formation.
The legislation has cleared both chambers of the General Assembly. If signed by Shapiro, it would lower the minimum membership requirement for forming a cooperative from five workers to three.
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