This new law allows employees to be partners in a specific, limited business

In Maryland, businesses that are owned and run by their workers have a legal form built for them. The Maryland Limited Worker Cooperative Association Act lets a Maryland limited liability company (LLC) elect to become a “limited worker cooperative association,” or LWCA. The law passed in the 2025 session, is now effective.

Before this law, Maryland had no worker cooperative statute. State law recognized five kinds of cooperatives — agricultural, consumer, electric, transportation and housing — mostly governed by corporation law. A worker co-op had to squeeze into one of those forms or write cooperative rules into an ordinary LLC agreement. Worker-owners told legislators that none of the existing entity types fit how democratic workplaces actually run. Supporters included Baltimore co-op Red Emma’s, the Baltimore Roundtable for Economic Democracy and the Baltimore Development Corporation, which helped draft the bill. Passage took three sessions. SB 870 was withdrawn in 2023, and SB 85 passed the Senate in 2024 but stalled in the House. The 2025 version cleared the House 100–37. Its effective date was pushed to October 2026 so the State Department of Assessments and Taxation could fold the change into planned system upgrades, at a one-time cost of about $278,400.

How an LWCA works

An LWCA is still an LLC, so it keeps limited liability and familiar filing rules, with a cooperative layer on top. The main features:

• Election: An LLC opts in through a statement in its articles of organization and must show its LWCA status prominently on legal documents.
• Members: Worker members are individuals who contribute labor. An LWCA may also have other patron members and investor members, who supply capital without working in the business.
• Minimum size: At least three worker members are needed to begin business, unless the sole member is another LWCA.
• Cooperative agreement: This replaces the usual operating agreement. It must cover the capital structure, membership classes, how members are admitted, transfer rules, contributions, the board’s size and terms, and whether to be taxed as a partnership or a corporation.
• Governance: A board of representatives of at least three people manages the business, and the members’ assembly holds an annual meeting.
• Collective option: A “collective worker cooperative” has a single class of worker members who manage everything directly, with no board.
• Leaving the form: Dropping LWCA status requires approval from two-thirds of worker members’ voting power and two-thirds of all voting members.

What it means

The practical gain is clarity. The Maryland State Bar Association’s Business Law Section noted that a distinct statute gives LWCA members more certainty about their rights and duties than a custom LLC agreement can. Default rules drawn from co-op best practice also mean founders no longer have to invent governance from scratch. The form could matter beyond startups. Owners nearing retirement can sell to their employees into a structure designed for shared ownership, and mission-driven lenders get a recognizable entity to finance. The state’s fiscal analysts rated the potential small-business effect as meaningful. Existing co-ops and new founders can now file as LWCAs with the State Department of Assessments and Taxation. Out-of-state worker co-ops may also register to do business in Maryland under the rules for foreign LLCs. Anyone converting an existing business should review the cooperative agreement and tax election with an attorney or accountant.

Contact Weiss LLP for more information.