Cooperatives: An Exploration of Types, Structure, and Additional Insights

What Are Cooperatives

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Cooperatives are financial institutions owned and controlled by members to meet their social, economic, and cultural needs.

Cooperatives typically consist of at least five members who all share equal voting rights regardless of how many shares they own.

Cooperatives are independent legal entities from their members; employees and directors do not become personally liable for debts incurred by this legal structure.

Cooperatives operate under the principle of participatory governance and emphasize resource sharing among members through democratic management practices.

What Are the Different Types of Cooperatives?

  1. Housing Cooperatives A housing cooperative is an ownership form that owns real estate properties such as one or more residential buildings, typically found in areas where housing costs are particularly expensive. Traditionally these types of cooperatives develop in areas with relatively expensive rent.
    Instead of other real estate properties such as condominiums where individuals purchase properties directly, housing cooperatives operate differently: members become members by purchasing shares of the corporate.
    Each member of a housing cooperative can occupy one housing unit built by it on property owned by them, while shareholders pool their resources together financially to establish and run it.
    An electoral representative of each cooperative will then use his/her purchasing power to negotiate discounted services and products associated with that property, in turn saving costs associated with them. They then have responsibility for screening members who wish to join each of its developments so as to assign housing units within its development portfolios.
  2. Credit Unions One form of cooperation that has grown increasingly popular over time is credit unions, financial institutions owned and managed by members which offer traditional banking services. Such credit unions range from local community-oriented banks to larger entities operating across multiple locations nationwide.
    Credit unions, being membership-based organizations, are exempt from certain taxes that would normally apply to for-profit enterprises such as commercial banks. Members also enjoy higher deposit interest rates with credit unions than with commercial banks.
    Revenues generated by retail cooperatives typically cover daily operations while profits go toward funding projects of interest to members. WANT MORE ON RETIRED COOPERS? WATCH THIS VIDEO.
    Retail cooperatives operate within the retail industry and are owned and managed by their customers; they own retail stores like grocery stores. A board of directors elected by its members oversees these cooperatives.
    Other retailers can establish retail cooperatives to share marketing expenses and negotiate discounted offers from manufacturers. Membership of retail cooperatives could include grocery stores, pharmacies, bookshops or hardware stores among many others. 4. Consumer Cooperatives
    Consumer cooperatives are businesses owned and run by its customers for their mutual benefit; its goal is to meet members’ needs. Consumers of products or services from such cooperatives also serve as providers of capital used to establish or purchase them.
    Consumer cooperatives typically take the form of retail outlets like food co-ops or bakeries; other varieties operate within healthcare, utilities and insurance sectors. How Can Cooperatives Be Structured?

Cooperatives are structured so as to foster democratic decision-making and control by all members within its structure, sharing certain features from across different types of cooperatives such as:

  1. Membership
    New members must be admitted according to criteria established during entity formation, usually according to profession, business activity or community affiliation of current or potential cooperative members who join as newcomers. Usually most cooperatives organize according to profession, business activity or community membership of its members and must accommodate these aspects when admitting newcomers as members.
    Military-affiliated cooperatives tend to accept current or past military officers and their spouses or relatives as members, who agree to adhere to all rules and make timely contributions.
    Each member is entitled to cast one equal vote during an AGM or special public meetings called specifically to vote on changes or proposals to organizational bylaws or organizational proposals. Governing Bylaws
    Each cooperative is governed by its bylaws, or rules of engagement that outline how different functions and activities will be carried out.
    A co-op’s bylaws determine how its board of directors is elected as well as when and how an AGM takes place.
    Other special meetings assist officers and directors when compensating when the cooperative can dissolve; bylaw provisions should guide all executive officer’s decisions as well as that of the board of directors.
  2. Board of Directors
    The board of directors acts as the collective’s decision-making organ and board members are elected for specific terms by members to fill these offices.
    Their functions and powers are clearly laid out within its bylaws.
    Voting decisions must also be resolved easily among members.
    History of Cooperatives
    Benjamin Franklin established one of the earliest successful cooperatives in America when he established Philadelphia Contributionship for Insurance from Loss by Fire — now one of America’s oldest continuing co-ops — in 1752. 1844 saw its formation.
    Rochdale Equitable Pioneers Society was formed in Rochdale, England. These pioneers outlined a set of values they held dear in operating their food cooperative – contributing greatly to its success and inspiring other cooperatives worldwide.
    Rochdale marked the beginning of modernity when they successfully formed their cooperative in 1865; Michigan then adopted what is believed to be the first law recognizing co-operative buying and selling practices as legal business models in 1895.
    Also created is the International Cooperative Alliance (ICA). Over 200 national cooperative organizations representing 92 nations belong to this international umbrella body of collective movements.
    The International Cooperative Alliance was formed with a mission of fostering peaceful global development and trade through membership by more than 750 million individuals globally. Established as the National Cooperative Business Association in 1916, today its existence remains recognized globally as an institution.
    Congress passed the Capper-Volstead Act to enable farmers to collaborate to market crops without violating antitrust laws, while also creating the Farm Credit Administration (1929) and National Credit Union Administration (1934).
    Rural Electrification Administration (1936) provided loans and assistance for cooperatives. Congress later passed National Consumer Cooperative Bank Act which created National Cooperative Bank. All of this contributed towards creating cooperative businesses. Lastly, Conclusion.
    Cooperatives are member-owned entities which meet members’ social, economic, and cultural needs.

Each cooperative member receives equal voting rights regardless of how many shares they own or the role their organization holds in the co-op.

Cooperatives are legal entities separate from their members, directors and employees who do not bear responsibility for its debts.