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Choosing a “Cooperative” Business Structure

            The corporative business model may be one of the least familiar vehicles for selling products and services to American consumers. However, most of us have personally benefited from the goods sold by cooperatives throughout our lives, even if we didn’t realize it. In broad terms, “a cooperative is a business or organization owned by and operated for the benefit of those using its services."

            For example, a great many of us have purchased products from cooperatives like Welch Foods, Inc., (they produce grape jelly and many other items); Land O’Lakes agricultural products (you may have used their butter); or have bought various tools from Ace Hardware. You’ll often also find a few housing and food cooperatives in your area, depending upon the size of the population. Some credit unions are also run like cooperatives through the Farm Credit System that was established by Congress back in 1916.

            Many of these businesses are both highly successful and greatly prized in their communities.

            Here are some basic features of cooperatives that attract many entrepreneurs, as well as average citizen consumers/owners.

What Unique Business Traits Are Offered by Cooperatives?

  • Profits and earnings. The members (or users/owners) of a cooperative share in the profits and earnings of the cooperatives in which they financially participate;

  • Management structure. Most cooperatives have an elected board of directors and officers who run the business. Regular members of the cooperative have “voting power to control the direction of the cooperative;"

  • Membership.  You become a member of a cooperative by purchasing shares of it. Fortunately, the number of shares you own will not affect your voting rights;

  • Size.  Although a great many cooperatives service only local needs, some of them grow so large and successful that they wind up on the Fortune 500 list every year;
  • Common types of businesses. Cooperatives are most frequently established by those involved with agriculture, retail, healthcare, art, and restaurants – as well as financial and housing industries. However, you may frequently run across one addressing more singular or diverse needs than those just named;
  • They can be converted into corporations. Members have the option of setting up a corporative as a corporation. However, if a group chooses to do this, the rather rigid legal rules governing the set-up and proper management of a corporation will then apply.

Advantages and Disadvantages of Cooperatives

  • Many people appreciate the lower taxes that must be paid by cooperatives;

  • There are a number of government grant programs that provide funding for cooperatives;

  • Prices of goods can be kept low by buying large quantities of goods for the members;

  • They provide a more inclusive, democratic approach to running a business compared to many other structures;

  • Their main drawback usually involves raising new funds. This is why you often see cooperatives regularly trying to attract new members.

To obtain help with handling all of your Georgia business planning needs, please contact the Law Offices of Shane Smith today.  You can schedule your free initial consultation with a knowledgeable Peachtree City estate planning attorney by calling: (770) 487-8999.


Shane Smith
Advocate for the Seriously Injured in Georgia