Home > What Is a Co-op?
A cooperative is organized around the needs of its
members, who own it and control it through a democratically elected board.
Benefits and profits distribution is based on use or patronage. To sample the variety
of co-ops in the U.S. economy, click on the screenshot above to visit that
co-op's website. See also
Types of Co-ops
Cooperative organizations are organized to meet the common needs of a
particular group of people. Often created in times of social and
economic stress as a grass-roots response to market imperfections, cooperative structure
is influenced by the particular situation, the
law, and historical and cultural factors.
While there is no universal definition of a cooperative, two are commonly
referred to in the United States.
The U.S. Department of Agriculture
(USDA) defines a cooperative as
user-controlled business that distributes benefits on the basis of use. Member
users, or patrons, own and democratically elect the board of directors, which provides
oversight of the co-op. Net earnings are distributed on the basis of
proportional use, or patronage, rather than on investment.
A broader definition of a cooperative has been developed by the
International Alliance of
Cooperatives (ICA), which describes a co-op as “an autonomous, voluntary
association meeting common economic, social, and cultural needs through a
jointly owned and democratically controlled enterprise."
Businesses operating on a cooperative basis subordinate the interests of the
capital investor to those of the business user, and returns on capital are
limited. Member patrons are the primary source of equity capital.
Cooperatives also differ from other business structures because they often
operate on principles that encompass broader social or
community, as well as business, concerns. These
seven cooperative principles
have been developed and modified over time, and are generally accepted by
1. Voluntary and Open Membership
2. Democratic Member Control
3. Member Economic Participation
4. Autonomy and Independence
5. Education, Training and Information
6. Cooperation among Cooperatives
7. Concern for Community
More recently, in response to changing market conditions, some cooperatives in
the United States have experimented with modifying these principles. For
example, some cooperatives have used closed membership to maximize efficiency,
profitability and the return on member equity investments. New cooperative laws
in some states have granted voting rights to non-user investors.
Business Structure Comparison
Impact on U.S.