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MarylandHB 00152025 Regular SessionHouseWALLET

Corporations and Associations - Limited Worker Cooperative Associations - Authorization (Maryland Limited Worker Cooperative Association Act)

Sponsored By: Lily Qi (Democratic)

Signed by Governor

Corporations and AssociationsChartersCommerce and Business -see also- ElectrComm; ForeignTr; etc.Cooperative AssociationsCorporations -see also- Municipal Corps; Public Corps & InstFees -see also- Attys' Fees; Devt Fees & TaxesIncome TaxInsurance AdministrationInsurance -see also- Health Ins; MAIF; Motor Vehicle InsLiabilityLimited Liability CompaniesMeetings -see also- Hearings; Open GovernmentMergers and AcquisitionsNamesNoticesPersonal RepresentativesRecords -see also- Land Records; Vital RecordsSalaries and Compensation -see also- Overtime; Reimb. RatesVoting -see also- Absentee and Mail-In VotingWorkers' CompensationWork, Labor, and Employment -see also- JobTrn; Leave; etc.

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Bill Overview

Analyzed Economic Effects

10 provisions identified: 3 benefits, 2 costs, 5 mixed.

Cooperative members gain personal debt protections

Beginning October 1, 2026, cooperative debts generally belong to the association, not its members. The articles of organization can change this default member-liability rule. Voting members and board representatives are not personally liable solely because they hold those roles. Membership or board service alone also does not authorize someone to bind the cooperative. These protections do not eliminate personal liability based on other grounds.

Cooperative financial controllers face personal taxes

Beginning October 1, 2026, people directly controlling cooperative finances can personally owe its admissions and amusement or motor fuel taxes. This liability includes interest and penalties when the cooperative owes those taxes. Financial controllers and agents responsible for withholding can also face liability when the cooperative negligently fails to withhold or pay income tax. Applicable LLC personal-liability rules also cover cooperatives owing sales and use tax as buyers or vendors, including interest and penalties. These rules cover both limited worker cooperative associations and collective worker cooperatives.

Worker cooperatives pay filing fees

Beginning October 1, 2026, worker cooperatives pay $25 to reserve a name and $100 to file articles of organization. Annual reports cost $300, or $100 for the family farm classification; standard certificates cost $20. Original foreign-entity name registration through year-end and typical foreign filings cost $100; processing of “other documents” costs $6. For specified filing categories, the law lists processing charges of $425 when expedited service is requested and $50 without it. The total depends on the filings and services used.

Worker cooperatives gain securities registration exemptions

Beginning October 1, 2026, worker cooperative membership interests and specified financial instruments are exempt from Maryland’s securities registration requirements. These include patronage refunds, per-unit retain certificates, equity instruments, and evidence of membership interests. The cooperative and its members, representatives, or salaried employees can offer and sell them without state broker or dealer registration. These exemptions concern the specified registration requirements, not a blanket removal of all securities rules.

Cooperative members gain profit-sharing rules

Beginning October 1, 2026, governing documents set how cooperatives divide profits and losses. Declared patronage profits paid or credited to patron members must match each member’s share of patronage during that period. Earnings can be paid in cash, credits, or written allocation notices. Governing documents must provide for redeeming membership interests when membership ends and may use capital accounts to set prices. They may also allow periodic redemption of allocation notices and shared reserves; collective members or the board decide how reserve earnings are used.

Cooperative worker status and insurance rules

Beginning October 1, 2026, forming a cooperative does not by itself make worker members employees; partnership tax treatment does not either. Other employment rules still apply. Insurers must base workers’ compensation premiums for covered employee-members on actual payroll value. That means total after-tax compensation, including base pay, bonuses, overtime, leave, benefits, commissions, and tips. The Insurance Commissioner enforces these rules and can conduct examinations and investigations; cooperatives can buy other insurance, and no premium rate is set.

Cooperative members gain meeting rights

Beginning October 1, 2026, cooperatives must hold annual member meetings with business and financial reports and notice 10 to 60 days beforehand. Members holding at least 20% of voting power on an issue can demand a special meeting in writing. The board can also call one by majority vote, or meetings can be called as the cooperative agreement allows. Special meetings can address only topics in their notices; remote participation is allowed when members can communicate, unless the agreement provides otherwise. Missing an annual meeting does not invalidate the cooperative’s actions.

New business option for worker cooperatives

Beginning October 1, 2026, Maryland LLCs can elect limited worker cooperative association status through their articles of organization. These cooperatives generally need three worker members to start, unless their sole member is another limited worker cooperative association. Their names must include “Limited Worker Cooperative Association,” “L.W.C.A.,” or “LWCA.” Their cooperative agreements must cover capital, membership rights, profit sharing, and tax choices, including the effects on worker members. Out-of-state cooperatives can register under Maryland’s foreign-entity rules, and legal papers served on a cooperative’s resident agent reach the association.

Worker cooperatives get closure and succession rules

Beginning October 1, 2026, cooperatives dissolve after governing-document triggers, a court order, or 90 consecutive days without members. A qualifying vote of two-thirds of worker members and two-thirds of all assembly voting power also triggers dissolution. Agreements can require higher votes or change the continuation period; timely successor arrangements or new membership can prevent memberless dissolution. Estate representatives can exercise deceased members’ rights to settle their estates. A representative or guardian automatically admitted after the last member’s death has 90 days after learning of it to reject membership or name someone else.

Worker voting rights shape cooperative control

Beginning October 1, 2026, most worker cooperatives need a managing board of at least three people. Collective worker cooperatives instead have one worker-member class managing all affairs. Governing documents set voting methods; workers otherwise denied votes for lack of patronage receive the minimum vote given to participating workers. Investor voting requires permission in those documents, and ordinary decisions require both a worker-member majority and a voting-power majority unless a higher threshold applies. Ending cooperative status requires amended articles, approval from two-thirds of worker-member voting power, and two-thirds of all members entitled to vote.

Sponsors & Cosponsors

Sponsor

  • Lily Qi

    Democratic • House

Cosponsors

  • Lorig Charkoudian

    Democratic • House

Roll Call Votes

All Roll Calls

Yes: 247 • No: 74

House vote • 4/7/2025

Third Reading Passed

Yes: 102 • No: 37 • Other: 1

Senate vote • 4/3/2025

Third Reading Passed

Yes: 45 • No: 0 • Other: 2

House vote • 3/17/2025

Third Reading Passed

Yes: 100 • No: 37 • Other: 1

Actions Timeline

  1. Approved by the Governor - Chapter 198

    4/22/2025

  2. Passed Enrolled

    4/7/2025House

  3. Third Reading Passed (102-37)

    4/7/2025House

  4. House Concurs Senate Amendments

    4/7/2025House

  5. Third Reading Passed (45-0)

    4/3/2025Senate

  6. Second Reading Passed with Amendments

    3/31/2025Senate

  7. Favorable with Amendments {923321/1 Adopted

    3/31/2025Senate

  8. Favorable with Amendments Report by Judicial Proceedings

    3/31/2025Senate

  9. Referred Judicial Proceedings

    3/17/2025Senate

  10. Third Reading Passed (100-37)

    3/17/2025House

  11. Second Reading Passed with Amendments

    3/15/2025House

  12. Floor Amendment {613723/1 (Delegate Qi) Adopted

    3/15/2025House

  13. Favorable with Amendments {553025/1 Adopted

    3/15/2025House

  14. Favorable with Amendments Report by Economic Matters

    3/15/2025House

  15. Hearing 1/21 at 1:00 p.m.

    1/8/2025House

  16. First Reading Economic Matters

    1/8/2025House

  17. Pre-filed

    10/16/2024House

Bill Text

  • Enacted

    4/22/2025

    PDF

  • Enrolled

    4/7/2025

    PDF

  • Third Reading

    3/15/2025

    PDF

  • First Reading

    1/8/2025

    PDF

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