WHAT IS A COOPERATIVE?
Here we provide a brief overview of cooperatives, including what a cooperative is, defining characteristics of a cooperative, how a cooperative gets started, and cooperatives that are in business today.
Basic definition of a cooperative
A cooperative is a company that is 100% owned and democratically governed by its members, and it pays out all of its profits and gains to its members in proportion to their transactions with it.
Owners are service users and called "members"
Cooperative owners are not traditional shareholders. They are the people who regularly transact with it, and they are often called "members."
Common cooperative characteristics
Profits and gains are distributed to members in proportion to their service use
Cooperatives distribute their profits and gains to their members in proportion to their individual transactions with the cooperative. These distributions are called "patronage dividends."
Democratic member governance
Members democratically govern their cooperatives, usually on a "one member, one vote" basis. This amounts to total member control over their cooperatives.
Members are shielded from corporate liabilities
Like a conventional company, a cooperative is a distinct legal entity from its members, so members are not responsible for any liability, obligation, or commitment a cooperative makes in the conduct of its business.
1. Business plan, members, and funding
Use a business plan to form an association of members and collect membership fees to meet initial capital needs.
Typical cooperative startup steps
2. Capital deployment and growth
Deploy initial capital to start growing the business according to the business plan.
Cooperative examples
More information
For more information on cooperatives: International Cooperative Alliance, National Cooperative Business Association CLUSA International, World Cooperative Monitor, United States Department of Agriculture