C.R.S. Title 7, Article 58), relevant federal tax provisions (IRC §§ 704(b), 1381–1388), and cooperative legal practice. Proposed replacement language is offered as a starting point for Jeff's redraft. The agreement is competent commercial boilerplate; the revisions below align it with the cooperative's actual structure, public benefit purpose, and tax positioning.
| # | Issue | Priority | Blocking board authorization? |
|---|---|---|---|
| 1 | IP assignment scope — overbroad works-made-for-hire | High | Yes — affects what members are agreeing to |
| 2 | Voluntary withdrawal and stock redemption mechanics missing | High | Yes — basic gap for any membership agreement |
| 3 | Patronage accounting and federal tax alignment | High | Yes — IRC 704(b) safe harbor requires capital account framework |
| 4 | Recital describes a coworking space, not a cooperative of practice | Medium | Advisable before authorization |
| 5 | Termination — no cure period or procedural protection for patron members | Medium | Depends on bylaws dispute resolution strength |
| 6 | Membership class architecture — no explicit Class A scope statement | Low | Advisable before second class is established |
The portfolio license shifts from prior-permission-per-occasion to notice-and-objection, which reflects that patron members are owner-practitioners, not employees. If existing client contracts require broader IP control over member deliverables, those constraints should flow through individual engagement letters, not the base agreement.
Your independent professional work, client projects, and personal portfolio stay yours. The portfolio display rule also changes: instead of asking permission every time you want to show co-op work, you give notice and the co-op can only object if there's a specific, documented client confidentiality reason.
"Scope of their service" is undefined and overbroad. Patron members are owner-practitioners, not employees or contractors. A member who writes software, designs a system, produces a curriculum, or creates visual work while participating in Techne cooperative activities could inadvertently assign that IP entirely to the Cooperative — with a license-back more restrictive than most employment agreements.
This is not required by Colorado LCA statute. C.R.S. § 7-58-602 defines patron member interests as financial rights and governance rights tied to patronage; IP assignment is purely contractual. For a cooperative of builders and practitioners, the current provision is backwards.
The portfolio license shifts from prior-permission-per-occasion to notice-and-objection, which reflects that patron members are owner-practitioners, not employees. If existing client contracts require broader IP control over member deliverables, those constraints should flow through individual engagement letters, not the base agreement.
The 90-day at-par redemption is the proposed default. The key open question for the board: should the bylaws or the membership agreement govern redemption mechanics, and should the redemption price be par ($100) or book value? The answer to the second question determines whether the 90-day language is final or needs a cross-reference to the bylaws.
Your membership rights and obligations continue until the withdrawal date. Outstanding balances you owe the co-op are settled before redemption. The IP, confidentiality, and arbitration obligations survive withdrawal.
C.R.S. § 7-58-1007, (ii) any outstanding financial obligations of Applicant to the Cooperative as of the withdrawal date, and (iii) Board authorization as required by C.R.S. § 7-58-1006. Any patronage credits formally noticed and allocated to Applicant's capital account but not yet distributed shall be redeemed in accordance with the Cooperative's then-current patronage redemption schedule. Applicant's obligations under Sections 3.3, 4, 6, 7, and 9 survive withdrawal.
The 90-day at-par redemption is the proposed default. The key open question for the board: should the bylaws or the membership agreement govern redemption mechanics, and should the redemption price be par ($100) or book value? The answer to the second question determines whether the 90-day language is final or needs a cross-reference to the bylaws.
Tax treatment is confirmed as Subchapter K. The 90-day Patronage Plan clock starts on first patron member admission. Tax counsel should confirm the capital account methodology, deficit restoration or qualified income offset election, and the form of annual K-1 notices of allocation before the plan is adopted — these elections should not be deferred to the first fiscal year end.
Without this, the board has full discretion to set or change the profit formula at any time without member input. The 90-day clock and the requirement for member approval of any methodology change protect members from post-hoc formula changes. You'll receive an annual statement (a K-1 form) showing your share of co-op income or loss each year.
Layer 1 — IRC § 704(b) (Subchapter K / partnership treatment — confirmed operative framework). Allocations must have "substantial economic effect" under Treas. Reg. § 1.704-1(b)(2). The safe harbor requires: (a) capital accounts maintained per regulation standards; (b) liquidating distributions made in accordance with positive capital account balances; and (c) a deficit restoration obligation or qualified income offset. Full Board discretion with no documented capital account framework undermines this safe harbor.
Layer 2 — IRC §§ 1381–1388 (Subchapter T / cooperative treatment). Not applicable — the Cooperative is confirmed to be taxed under Subchapter K. The Subchapter T qualified patronage dividend requirements are noted for reference only and do not govern this agreement.
Colorado statutory default — C.R.S. § 7-58-1004. Absent bylaws specification, all profits must be allocated to patron members in proportion to their patronage. The Board may set aside reserves before allocation, but proportionality is the statutory default. Full discretion departs from this baseline.
C.R.S. § 7-58-1004; (c) the form and timing of patronage dividends, including the minimum percentage to be paid in cash; (d) the procedures for issuing written notices of allocation to each patron member; and (e) the procedures for maintaining and adjusting patron capital accounts. The Board may amend the Patronage Plan, provided that any amendment reducing the cash component of patronage dividends or changing the patronage basis shall require approval by a majority of patron members at a duly noticed meeting.
IRC § 704(b).
Tax treatment is confirmed as Subchapter K. The 90-day Patronage Plan clock starts on first patron member admission. Tax counsel should confirm the capital account methodology, deficit restoration or qualified income offset election, and the form of annual K-1 notices of allocation before the plan is adopted — these elections should not be deferred to the first fiscal year end.
The replacement accurately identifies the Cooperative's public benefit purpose, its hybrid membership base (Boulder + virtual), and its cooperative-of-practice character. Jeff should confirm the replacement aligns with the Articles of Organization language before board authorization.
This matters because courts and arbitrators use the opening recital to interpret everything else in the agreement when the language is ambiguous. Accurate foundational language protects the co-op and its members.
This describes a real-estate and facilities operation. It omits the Cooperative's stated public benefit ("Cultivating scenius"), its Colorado Public Benefit LCA status, its hybrid membership base (Boulder + virtual), and its orientation as a cooperative of practice rather than a facility operator.
Foundational framing in recitals affects how courts and arbitrators interpret ambiguous provisions throughout the agreement — including IP assignment scope, confidentiality obligations, and service obligations. The current language misrepresents the actual entity.
The replacement accurately identifies the Cooperative's public benefit purpose, its hybrid membership base (Boulder + virtual), and its cooperative-of-practice character. Jeff should confirm the replacement aligns with the Articles of Organization language before board authorization.
The 30-day cure period is limited to breaches reasonably capable of cure; false statement and criminal conduct remain subject to immediate action. This provision is only coherent if the bylaws contain a real dispute resolution procedure — the bylaws v2 analysis addresses this directly. Jeff should confirm alignment between the two documents before the board authorizes either.
As an owner-member with equity in the co-op, you have the right to know what you're alleged to have done wrong and the chance to address it before a final decision is made. This is the minimum procedural protection appropriate for an ownership interest.
Patron members are owner-members of the Cooperative, not at-will participants. Termination without notice, cure opportunity, or appeal is procedurally thin for an owner class. C.R.S. § 7-58-1101 permits associations to specify termination events in governing documents — but the membership agreement should establish minimum procedural protections consistent with cooperative governance principles.
The 30-day cure period is limited to breaches reasonably capable of cure; false statement and criminal conduct remain subject to immediate action. This provision is only coherent if the bylaws contain a real dispute resolution procedure — the bylaws v2 analysis addresses this directly. Jeff should confirm alignment between the two documents before the board authorizes either.
The Section 1.1 addition provides a clean path for future membership classes without requiring this agreement to be amended. Jeff should confirm timing on the Techne co-op agreement so the definitions in both documents (Governing Documents, Board, Confidential Information) can be kept consistent.
Nothing changes about your rights as a patron member. This simply labels the system clearly so there's no ambiguity about which agreement governs which type of membership.
The Section 1.1 addition provides a clean path for future membership classes without requiring this agreement to be amended. Jeff should confirm timing on the Techne co-op agreement so the definitions in both documents (Governing Documents, Board, Confidential Information) can be kept consistent.
The research read concurs that Schedule A leaving share price and dues as bracketed placeholders is a blocking issue. This read adds a specific MA-level problem: § 1.4 hard-codes the Class A share price at one hundred dollars while Schedule A for the same class is still a placeholder. Nothing can be issued until Schedule A is populated, and once it is, the figure must match § 1.4 or the two instruments will drift apart when the Board revises the price.
Bylaws §§ 1.2.4 and 5.1.2 make the Schedule A price both the trigger for membership and the opening entry in a member's capital account. The Membership Agreement's hard-coded $100 in § 1.4 creates a parallel source of truth. Any future Schedule A revision would require a simultaneous MA amendment, or the two documents would contradict each other on the price that determines the initial capital account balance.
MA § 3.3 says allocations are taken into account on the member's return in the taxable year in which they were received. Sections 2.3 and 2.4 use net margins, patronage dividends, and written notices of allocation. These are cooperative-taxation concepts belonging to IRC § 1388 and Subchapter T of the Internal Revenue Code.
The cooperative has elected partnership tax treatment under Subchapter K. Under that election, a member reports their distributive share on a Schedule K-1 in the year the cooperative's fiscal year closes — whether or not any distribution is made. This is precisely what Bylaws §§ 1.10 and 6.1 state. The "in the year received" framing in MA § 3.3 therefore contradicts both the bylaws and the elected tax treatment.
The distinction is material: under Subchapter T, a patronage dividend is taxable to the member only when distributed. Under Subchapter K, a member's distributive share is taxable in the year allocated, even if retained. A member reading § 3.3 as written would have an incorrect understanding of their tax obligation.
The existing analysis flags the 90-day vs. 5-year timing conflict between the MA and the bylaws. The research read concurs and identifies a deeper economic problem specific to the Subchapter K election that is the more significant fairness issue.
Three provisions describe what a departing member receives and they do not line up. Bylaws § 1.7.4 settles the capital account at book value under Treas. Reg. § 1.704-1(b)(2)(iv). MA § 5.4 redeems the share at its $100 original price within ninety days, then handles allocated-but-undistributed patronage credits separately under a redemption schedule that does not yet exist. Bylaws §§ 1.7.3 and 1.9 give the Board up to twelve months. The timing conflict is the smaller half of the problem.
The larger half is specific to Subchapter K. Under the partnership election, a member pays income tax each year on profit allocated to their capital account — whether or not the cash is distributed. If withdrawal returns only the $100 share price and not the accumulated capital-account balance (which includes all those taxed-but-retained allocations), the member has paid tax on value they will never receive. This is the sharpest economic and fairness question in the package, and it is embedded in the current MA structure.
MA § 5.4's separate "patronage credit" redemption schedule is the right instinct, but as written it sits beside the capital account rather than being defined to equal it. The two mechanisms need to be unified.
The existing analysis above flagged the IP provisions in MA §§ 3.4.1–3.4.4 as a blocking member-overreach concern. The research read reached a different conclusion on v.2: assignment has been narrowed to expressly commissioned, separately compensated work, with the member's prior work, independent practice, and open-source contributions carved out, and a portfolio license returned to the member. On this read, the member-overreach concern is largely resolved in v.2.
Two narrow residual items remain, neither blocking on their own.
The assignment language uses the work-made-for-hire label as a backup mechanism. For a non-employee member, software and inventions rarely qualify as statutory works made for hire under 17 U.S.C. § 101 — that category is narrow and requires either employment or a written agreement for one of the nine enumerated categories. Where the work-made-for-hire label does not apply as a matter of law, the assignment language (not the label) is what actually transfers rights. Confirm in the drafting notes that the assignment provision, not the work-made-for-hire label, is the operative mechanism for IP transfer.
Confirm that this patron member agreement is not expected to capture intellectual property developed within spun-out ventures. Venture IP belongs in separate venture instruments (founders' agreements, venture formation docs) rather than the base membership agreement. If there is any ambiguity about which work product is covered by the patron member assignment, it should be resolved in the drafting notes before ratification.
MA-A02 (research read, May 2026) identified five Subchapter T mechanisms embedded in a Subchapter K document. All five have been corrected inline in MA v.2. One additional disclosure (phantom income acknowledgment in § 3.3) has been added. The Patronage Plan's data-reason note in § 2.4 has also been corrected to remove a reference to Subchapter T that was present in the original annotation.
The five Subchapter T mechanisms identified in MA-A02 have been replaced with their Subchapter K equivalents throughout §§ 2.4, 3.3, and 5.4. Each substitution is documented inline with the prior text (data-original) and the Subchapter K rationale (data-reason). The changes are:
§ 2.4(b) — "net margins" → "net income." C.R.S. § 7-58-1001 uses "margins" in the Subchapter T context. Under Sub K the allocable figure is net income, defined consistently with § 5.3.1 of the Bylaws and IRC § 704(b).
§ 2.4(c) — "patronage dividends, including the minimum percentage to be paid in cash" → "Patronage Distributions, including the minimum percentage of each Patronage Allocation to be paid as a cash distribution in the fiscal year of allocation." "Patronage dividend" is a defined term under IRC § 1388 (Subchapter T) — it does not apply to a Sub K entity. The two-step framework (Patronage Allocation = capital account credit; Patronage Distribution = cash paid out) is the correct Sub K mechanics. The IRC § 1388 minimum-20%-cash requirement is eliminated — our minimum percentage is whatever the Plan specifies.
§ 2.4(d) — "written notices of allocation" → "Schedule K-1 forms." Written Notice of Allocation is the defined Subchapter T instrument (IRC § 1388(b)). Under Sub K, the annual member tax document is the Schedule K-1 (Form 1065-K1).
§ 3.3 opening — "in the taxable year in which they were received by Applicant" → "in the taxable year of the Cooperative in which the allocation is made, whether or not a cash distribution is made in that year." The "year received" rule is Subchapter T timing. Under Sub K (IRC § 702, Treas. Reg. § 1.702-1), a partner's distributive share is taxable in the partnership's taxable year of allocation, not the year of distribution. A phantom income disclosure has been added immediately after this clause.
§ 3.3(b) — "annual written notices of allocation" → "Schedule K-1." Consistent with § 2.4(d) above. Language also updated to specify that the K-1 reflects the member's Patronage Allocation and Capital Account balance, consistent with standard Sub K K-1 practice.
§ 5.4 — "patronage credits formally noticed and allocated" → "Patronage Allocations credited to Applicant's Capital Account." "Formally noticed" is the Sub T written-notice mechanism; under Sub K, allocations are credited to the capital account by accounting entry. "Patronage redemption schedule" → "distribution schedule, subject to the distribution limitations of C.R.S. § 7-58-1007 and the Bylaws."
Jeff should review whether the C.R.S. § 7-58-1004 citation in § 2.4(b) should be retained (it is the Colorado state-law proportionality hook) or replaced with a general ULCAA reference. MA-A02 notes the § 7-58-1004 citation is a state-law cooperative-purpose provision that can remain even in a Sub K entity — the federal framing is what required correction. The citation is retained in v.2 pending Jeff's confirmation.
Several technical tax terms in the membership agreement were written for a different type of cooperative — one that files its taxes as a corporation under what's called "Subchapter T." RegenHub files as a partnership under "Subchapter K," and the difference matters for how and when members owe taxes on their share of co-op income.
The most important practical change is in § 3.3: the agreement now correctly states that your share of co-op income is taxable in the year the co-op earns it — not the year you receive a cash payment. A new sentence explicitly acknowledges that this can result in a tax bill in a year when no cash distribution was made. This is called "phantom income," and members should factor it into their financial planning. The co-op will deliver a Schedule K-1 (the standard partnership tax form) each year showing your share.
The term "patronage dividends" has been replaced with "Patronage Distributions" throughout § 2.4. "Patronage dividend" is a specific tax term for a corporate cooperative; we use "Patronage Distribution" to mean cash actually paid from your capital account. Your capital account is credited with a "Patronage Allocation" first (the paper entry); then when cash is distributed, that's a "Patronage Distribution." The two steps are now named clearly in the agreement.
| Location | Before (Sub T) | After (Sub K) |
|---|---|---|
| § 2.4(b) | net margins | net income |
| § 2.4(c) | patronage dividends … minimum percentage to be paid in cash | Patronage Distributions … minimum percentage of each Patronage Allocation to be paid as a cash distribution in the fiscal year of allocation |
| § 2.4(d) | issuing written notices of allocation to each patron member | preparing and delivering Schedule K-1 forms to each Patron Member |
| § 3.3 opening | in the taxable year in which they were received by Applicant | in the taxable year of the Cooperative in which the allocation is made, whether or not a cash distribution is made in that year |
| § 3.3 — added | [no prior text] | Phantom income disclosure: "Applicant acknowledges that this may result in taxable income without a corresponding cash distribution in the same year." |
| § 3.3(b) | annual written notices of allocation | Schedule K-1 (also: K-1 now specified to include Capital Account balance) |
| § 5.4 | patronage credits formally noticed and allocated … patronage redemption schedule | Patronage Allocations credited to Applicant's Capital Account … distribution schedule, subject to C.R.S. § 7-58-1007 and the Bylaws |
Defined terms (Patronage Allocation, Patronage Distribution, Patronage Ratio, Patronage Ledger, Capital Account). These six terms are used in the revised §§ 2.4 and 3.3 but are not yet formally defined in the agreement. Per the Sub K vocabulary workup (June 2026), they belong in the MA definitions section or a new Schedule B. Recommend Jeff add a Definitions section to MA v.2 before ratification. Full definitions are available in the Sub K vocabulary workup on file.
C.R.S. § 7-58-1004 citation in § 2.4(b). Retained pending Jeff's confirmation. The citation is the Colorado state-law proportionality hook and is not a Subchapter T provision per se — it can coexist with Subchapter K. However, MA-A02 noted this citation may imply Subchapter T mandatory distribution rules (the 20% minimum cash rule under IRC § 1388) that do not apply to us. Jeff should confirm whether to retain as-is, replace with a general ULCAA reference, or remove.
MA-A03 (capital account / withdrawal amount reconciliation). Not addressed in this scrub. The timing and amount conflict between MA § 5.4 (par value + patronage credits) and Bylaws § 1.7.4 (book value / capital account balance) remains open and is the more significant fairness issue flagged in MA-A03. Recommend addressing in the same edit cycle as the definitions issue above.
The four-class membership matrix (board memo §3, June 2026) named Class Two (Co-working Member) as a distinct class with two open cells marked †: patronage eligibility and capital account / K-1 status. The board memo §5 Q4 asked: "Is Class Two co-working a partner for tax, with a capital account and a K-1, or a customer on the Hub track?"
The answer determines which agreement Co-working Members execute. If partners: this Agreement. If customers: the Hub Membership Agreement.
Neither MA v.1 nor v.2 stated any admission process or relationship threshold for Cooperative Member (Class One). The four-class membership matrix board memo (§4, June 2026) establishes Class One as an invited class earned over a relationship of approximately ninety days before admission. Without this language in the Agreement, the document is silent on what the admission process actually requires, which could create inconsistency between the member's expectations and the Cooperative's practice.
MA-A03 identified the withdrawal mechanics conflict (capital-account vs. par-value redemption; 90-day vs. 12-month timing). That issue remains open. The four-class membership matrix board memo (§4, June 2026) adds a specific outer limit: "the share and any positive capital balance are redeemed on a schedule of up to five years."
MA v.2.2 § 5.4 currently references Bylaws §§ 1.7.3–1.7.4, which set the outer limit at three years. The board memo's five-year statement appears to be a new policy position, not yet reflected in the Bylaws or the MA. If the board intends a five-year outer limit, both the Bylaws and the MA will need amendment — the MA cannot unilaterally contradict the Bylaws (MA § 1.2 makes the Bylaws the senior document in case of conflict).
Confirm with board and counsel whether the intended outer limit is three years (Bylaws current) or five years (board memo intent). If five years: amend Bylaws §§ 1.7.3–1.7.4 first, then conform MA § 5.4 to the amended Bylaws. Do not change the MA in isolation. This item is not applied in v.2.2; the § 5.4 cross-reference to the Bylaws remains as the operative rule pending that determination.
MA §§ 2.4(c) and 3.3 (as revised in MA-A05) flag that distributive shares are taxable in the year of allocation, whether or not distributed in cash — the phantom income risk. The board memo (§4, June 2026) states that the no-phantom-tax discipline "should be explicit board policy," meaning the Board commits to sizing tax distributions to cover each member's estimated annual liability on patronage allocations.
This is a stronger commitment than disclosure. A disclosure tells the member they may face phantom income. A policy tells them the Board will act to prevent it. The distinction matters for member recruitment and member trust. The MA should reflect the policy once adopted — not only the disclosure.