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What are Cooperatives? – Types, Structure, and More
Finance

What are Cooperatives? – Types, Structure, and More

What are Cooperatives?

Cooperatives are member-owned financial institutions formed to meet the members’ social, economic, and cultural needs.

A cooperative should make up of at least five members, and each member enjoys equal voting rights irrespective of the number of shares they own.

Also, a cooperative is a separate legal entity from its members, and employees and directors are not liable for the entity’s debts.

Cooperatives form on the principle of participatory governance, and its structure encourages the sharing of resources among members and a democratic style of management.

What are the Types of Cooperatives?

cooperatives

1. Housing Cooperatives

  • A housing cooperative is a cooperative type that owns real estate properties, which comprise one or more residential buildings.
  • Housing cooperatives usually develop in areas where the cost of housing is high.
  • Unlike other real estate properties, such as condominiums, where individual buyers acquire properties, housing cooperatives are member-based.
  • Interested individuals can become members by purchasing shares in the corporate.
  • Each member of a housing cooperative has the right to occupy one housing unit in a property developed by the cooperative.
  • Shareholders pool their financial resources together.
  • It leverages their buying power, allowing them to reduce the cost of services and products associated with a specific property.
  • The elected representatives are responsible for screening and selecting members to be allocated housing units in each of the properties developed by the cooperative.

2. Credit Unions

  • Another popular form of cooperation is the credit union. Credit unions are financial institutions owned and managed by members, and they provide traditional banking services.
  • Credit unions range from small community-owned banks to large entities spread across the country.
  • Since credit unions are membership-based, they are considered non-profit entities, exempt from certain tax forms that for-profit entities subject to it.
  • Credit union members enjoy higher interest rates on deposits than the rates paid by commercial banks.
  • Revenues generated by the organization use to finance its daily operations, while the profits used to fund projects are of interest to the members.

3. Retail Cooperatives

  • Retail cooperatives domiciled in the retail industry. They own and managed by their customers, and they own retail stores such as grocery stores.
  • Retail cooperatives oversee by an elected board of directors, which elects by the members.
  • Other retailers can also establish a retail cooperative to share marketing expenses and use the collective purchasing powers to negotiate discounts from manufacturers.
  • Members of retail cooperatives can be grocery stores, pharmacy stores, bookshops, hardware stores, etc.

4. Consumer Cooperatives

  • A consumer cooperative a commercial own and managed by its customers, and its goal is to meet its members’ needs.
  • The consumers of the cooperative products or services also the providers of capital used to establish or purchase the entity.
  • Most consumer cooperatives take the form of retail outlets such as food coops and bakeries.
  • And also, other types operate in the areas of healthcare, utilities, and insurance.

How are Cooperatives Structured?

cooperatives

Cooperatives structure in a way that allows shared decision-making and democratic control in every decision made by the entity. Certain elements share among the different types of cooperatives, including:

1. Membership

  • New members must admit, according to the criteria agreed upon during the formation of the entity.
  • Usually, most cooperatives organize according to the profession, business activity, or community of the members, and new members who join must share these aspects.
  • For example, military-affiliated cooperatives mainly admit current or past military officers and their spouses or relatives. The members must agree to abide by the rules and make timely contributions.
  • Each member is entitled to one equal vote during the annual general meeting (AGM) or extraordinary public meetings called to vote for specific organizational changes or proposals.

2. Governing Bylaws

  • Each cooperative governer by its bylaws, which are rules of engagement that specify the procedure of carrying out different functions and activities.
  • The bylaws of a cooperative specify how the board of directors election, how and when the AGM.
  • Other special meetings help, how the officers and committee of directors compensate when the cooperative can dissolve, etc.
  • The cooperative’s bylaws’ provisions must guide all executive officers’ decisions and the board of directors.

3. Board of Directors

  • The board of directors serves as the cooperative’s decision-making organ, and the board members vote into the office for a specific term by the members.
  • The functions and powers of the board of directors outline in the cooperative’s bylaws.
  • And also, the board should consist of many members to be a definite winner when voting on individual decisions.

History of Cooperatives

1752

  • The first successful cooperatives prearranged in the United States when Benjamin Franklin formed the Philadelphia Contributionship for the Insurance of Communities from Loss by Fire — the oldest continuing cooperative in the U.S.

1844

  • The Rochdale Equitable Pioneers Society establish in Rochdale, England.
  • These pioneers wrote down a set of values to operate their food cooperative, contributing to their success and feast to other cooperatives worldwide.
  • The successful formation of the cooperative in Rochdale marks the start of the harmonious, modern era.

1865

  • Michigan passed what believe to be the first law recognizing the cooperative method of buying and selling.

1895

  • And also, the International Cooperative Alliance (ICA) establish.
  • Today over 200 national cooperative organizations representing 92 nations belong to ICA, the apex organization of all national collective movements.
  • The ICA aims to promote harmonious development and trade worldwide and boasts an individual membership of more than 750 million people.

1916

  • The first national cooperative association form now recognizes as the National Cooperative Business Association.

1922

  • Congress passed the Capper-Volstead Act, letting farmers act together to market their crops without violating antitrust laws.

1920s & 30s

  • And also, congress established governmental activities — the Farm Credit Administration (1929), the National Credit Union Administration (1934).
  • And also, the Rural Electrification Administration (1936) — to deliver loans and assistance to cooperatives.

1978

  • And also, congress approved the National Consumer Cooperative Bank Act, founding the National Cooperative Bank.

Conclusion

A cooperative is a member-owned entity that meets the members’ social, economic, and cultural needs.

Each cooperative member receives equal voting rights, regardless of the number of shares they own or their organization’s role.

And also, a cooperative is a separate legal entity from the members, directors, and employees, and the parties are not liable for the entity’s debts.

Also Read: What is Cover Letter? – The Best 7 Templates and Examples

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